By Senad Karaahmetovic
Despite very weak results reported by Target (NYSE:TGT) yesterday, which forced shares to close 25% lower on the day, Raymond James analyst Bobby Griffin is telling clients to use the pullback to buy shares.
“We continue to be buyers on the pullback, and see Target as a long-term winner in today's retail landscape and believe the company can sustain its recent market share gains across multiple product categories due to its customer loyalty (i.e., F1Q traffic gains), strong brand partnerships (AAPL, ULTA, LEVI etc.), and growing private label penetration,” Griffin said in a client note.
The analyst reaffirmed a Strong Buy rating and cut the price target to $205.00 per share, down from $275.00. He admitted that Target could have executed the quarter better.
“Admittedly, the quarter was not well managed by Target, and we could have better predicted a downside scenario given the run in fuel prices, but there are silver linings to consider, including TGT’s comp sales beat on traffic gains (while other retailers have been ticket driven) and tight SG&A expense management. In our history of following/studying retail, cost problems are typically easier to correct (admittedly not overnight) than brand loyalty or weak traffic trends, and we believe the current gross profit pressures are largely transitory and can be fixed,” the analyst added.
Target stock price closed at $161.61 yesterday.