BofA likes Target’s comeback, but not the stock

Target’s comeback, with a catch

Target is getting a little more credit from Bank of America after stronger consumer trends and improving sales under new leadership. The firm nudged up its earnings estimates, raised its price target to $124 from $110, and yet still slapped an Underperform rating on the stock. Translation: nice progress, but BofA still thinks the market may be getting ahead of itself.

The numbers are improving — just not enough for a victory lap

BofA now expects Target to earn more across fiscal 2027 through 2029, and it sees second-quarter sales and margins holding up better than consensus. It’s betting comparable sales growth could come in around 2.5%, with gross margin also looking a touch healthier than the Street expects. That’s the kind of incremental good news that keeps a turnaround story alive.

Why the caution flag is still up

Here’s the rub: Target’s stock has already had a serious glow-up, trading near its 52-week high. So even if the business keeps improving, the valuation may have eaten a lot of that optimism already. BofA is also worried about heavy SG&A spending, tougher comparisons later this year, and whether Target can keep the momentum going in apparel, home, and food.

Big picture

This is one of those classic Wall Street situations where the business story and the stock story split up and start dating other people. Target may be turning the corner, but BofA thinks the shares have maybe sprinted a little too far ahead of the fundamentals.