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Stay on Target: Stock Still Shows Upside Potential

Andrew Keene

On Monday, Target (TGT) had its "buy" rating reaffirmed by analysts over at Deutsche Bank, according to ARN. It has a target price of $74 on the stock. Bank of America-Merrill Lynch and Citigroup also boosted their price targets for TGT to $72 and $79, respectively. On Wall Street, the stock currently has a consensus rating of "buy" and an average target price of $73.

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At $68.40, Target is an attractively priced company with plenty of upside. Over the past ten years, TGT has grown its dividends by nearly 20%, with a dividend yield of 2.12%. Target has a 52-week low of $54.93 and a 52-week high of $71.24. Target has a market cap of $43.85 billion and a P/E ratio of 15.

Today, Target reported first-quarter earnings of $498 million or $0.77 per share. The company's adjusted EPS for the first quarter was $1.05. Target reported $16.6 billion in revenue for the US compared to its newly opened Canada stores, which brought in $86 million in sales. There are currently only 24 stores operating in Canada, but Target plans to open 100 more stores by the end of 2013.

Although some figures were lower than what analysts were expecting, CEO Gregg Steinhafel still believes that this expansion will prove profitable for Target. "We remain confident in our strategy, and we continue to invest in initiatives, including Canada, our digital channels, and CityTarget, that will drive Target's long-term growth," said Steinhafel.

My Trade: Buy the TGT Jan 14 70-75 call spread for about $1.53
Risk: $153 per one lot
Reward: $347 per one lot
Breakeven: $71.53

Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long

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