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Ahead of the Bell: Target upgraded

NEW YORK (AP) -- An analyst raised his rating for Target on Friday, saying that the chain should start to see a profit in Canada soon.

Target has 1,782 stores in the U.S. and plans to open its first stores in Canada this year.

Janney Capital Markets analyst David Strasser said in a client note that Canada should start to see a profit in 2013's fourth quarter and become more profitable in 2014. The analyst said that Minneapolis-based Target is on pace to open 124 stores in Canada next year, with the first store open expected to occur in 2013's first quarter.

Strasser said that there will likely be some volatility surrounding the timing of store openings, but that Canada should become profitable because of its prime real estate, strong awareness of the Target brand, better mix and relatively less crowded general merchandise market.

Strasser also feels that online sales will start to gain momentum, as there's been a tough transition since Target took its online business in house from Amazon in August 2011. The analyst predicts double-digit online growth in 2013 and 2014.

The analyst also feels that collaborative partnerships will continue to be a part of the retailer's strategy even though its recent teaming with Neiman Marcus did not fare as well as many had expected.

"Designer partnerships remain a strong and effective differentiating factor for the company, and one that we believe will benefit 2013 as the lineup continues with the Prabal Gurung collection in February and March and the Sam and Libby collection in May," Strasser wrote.

The analyst lifted Target Corp. to "Buy" from "Neutral" and kept a $72 price target.

Target shares finished at $60.16 on Thursday and have traded in a 52-week range of $48.28 to $65.80 over the past year.