The case for Target’s $100 stock price

Shares of Target are mis-valued at current levels around $50 and could eventually double if the company delivers on plans achieve $100 billion in sales and earnings per share of $8 by 2016 or 2017.

That’s according to Bernstein Research analyst Colin McGranahan who noted in a recent research report that he spent time at Target’s Minneapolis headquarter where he met with chairman, president and CEO, Gregg Steinhafel, CFO Doug Scovanner and EVP merchandising Kathee Tesija.

“Overall, our meetings had a positive tone with a bullish longer-term perspective, a somewhat more positive near to medium-term outlook and the prospect for significantly improve visibility over the next few months,” McGranahan wrote in a research report.

He notes that the company’s merchandising initiatives are on track and PFresh remodeling activity is producing intended results. The pressure on the company’s share price relates to apprehension about the impact on profitability related to the 2013 entry into Canada and an overemphasis on cyclical economic problems currently being encountered by Target’s lower income customers.

McGranahan is undeterred and noted that “key initiatives remain very much on track and we continue to think Target will see improving trends in its business as these initiatives progress, while the company is well positioned to benefit when the middle income consumer finally begins to increase discretionary spending.”

That’s why with the company’s stock price hovering at $50 shares of Target look quite attractive to McGranahan.

“The market is mis-valuing the Canadian entry, creating a rare and compelling opportunity for patient, longer term investors,” he said.