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Target is the YF+ investment idea of the day

Yahoo Finance's Jared Blikre discusses a bullish call on Target, which is the Yahoo Finance Plus investment idea of the day.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to get you all a check of the markets. Another volatile one today. The NASDAQ in the red, but the Dow and the S&P 500 managing to climb back up into the plus column. Jared Blikre taking a look, a closer look at the markets now, as he usually does at this time of day. And Jared, you have your eye on Citigroup. Looks like CEO Jane Fraser out with a new strategy, but it may cost some profits in the short-term.

JARED BLIKRE: Yes, that's the whole part of the bad part of a turnaround strategy, is you have to pay for it. And it takes some time to execute. This is what's happening today. Let's go to a two-day chart because this investor day took place yesterday. And some headlines that came out, they're making a big push into independent wealth management. And they have about $181 billion in client assets currently.

And with their product called Citi Alliance, they're going to be providing core banking and lending solutions to independent advisors and broker dealers. And with a company called Invest Cloud, excuse me, they're going to be offering these products to nearly 150 wealth management firms.

Now let's take a look at a one-year chart of Citi. You can see trending down, if ever so slowly. Let's take a three-year chart, and we can see what happened during the pandemic as well. Looks like more sideways choppy action. And in fact, let's put a max chart up. And you can see the record high after a stock split or a reverse split. That was up around 600 in the global financial crisis. So some work to do to get back up there.

But here's what Bank of America is saying about this. Analyst rates it a buy with a price target of $90. You can see it's about $30 above the current price, saying, we believe that investor day delivered exactly what investors needed in order to develop a thoughtful investment thesis on the stock based on what we considered were a realistic set of financial goals. There are many aspects to management strategies that may cause certain investors to be skeptical, but when not everything is getting out, we get to a low double digit return on tangible common equity on a sustainable basis. It should not be particularly challenging.

So I think there are some caveats embedded in there, but BMO Capital Markets a little bit more forthright here, rate the stock an outperform with a price target of $78, 20 bucks above the current price, excuse me, saying revenue goals look aggressive and costs remain laden by ongoing efforts to fulfill consent orders from the Fed and the OCC-- that's the Office of the Comptroller of the Currency. And they're cutting EPS estimates by 4% for 2022 and 6% for 2023, as higher costs are likely to more than offset higher revenue. So Citigroup down a little bit today, but trying to get that turnaround strategy in place.

KARINA MITCHELL: Hey, Jared, on the flip side, Best Buy having its best day in a bit, up almost 10% on annual forecast, saying that it is improving sales and seeing better margins.

JARED BLIKRE: Yeah, finally, Best Buy has struggled a little bit recently. You can see this is what's happened over the last year. Let me put some candlesticks up here. And actually, let's go to a three-year view. I like to look at stocks over this period to see what they did during the pandemic. And after initial burst here, we can see basically trading sideways to slightly down here, with the exception of this peak right here.

And here's what analysts are saying about some of the results. KeyBank saying investors had been bracing for a challenge quarter. Its annual guidance showed improving sales and margin trends with numerous growth investments.

Truist, which rates the security a hold with a price target of 108, so slightly below that current price right here, saying, excuse me, '24 and '25, so basically full year '24 and full year '25 targets suggest that their earnings growth should continue. The company is expected to detail their plans to boost earnings per share to what we estimate to be $11 to $12 per share in EPS by '24 to '25. And the company continues to return capital via dividends and buybacks.

So Best Buy a little bit beleaguered here, but you can see kind of racing towards potentially the upper end of this range there. And we'll have to see if and what it does when it gets there.

ALEXIS CHRISTOFOROUS: All right, and Jared, finally, our Yahoo Finance Plus idea of the day, and that is a bullish call on Target. I know they were out with some pretty spectacular earnings earlier in the week.

JARED BLIKRE: That's right, and you can see that they're up about 62 basis points right here. You can really see that nice push higher on this chart. This is a big gap created by the earnings announcement. And I just want to get to some of the comments by Argus Research here. Let's see if we can get that up. And there we go. They have a long-term price target of 300. They're raising their full year 2023 estimate after the fourth quarter EPS topped their estimate.

So I'm going to skip down to the conclusion here, as we're running a little bit short on time. In fiscal year 2022, Target's private brands grew 18% to an impressive $30 billion in revenue, which is approximately the same size as Kraft-Heinz. Their 12-month price objective is $300, a healthy 35% above the current share price. There is upside to this, excuse me, estimate. And management plans to recommend that the board boost the dividend by 20% to 30% later this year. Investors like those boosted dividends, don't they?

ALEXIS CHRISTOFOROUS: That they do. They are very attractive. All right, Jared Blikre, thanks so much.