Dec. 29: Year after breach, Target's shares at all-time high

After a rocky start to 2014, Target Corp. is ending the year on a high note.

The Minneapolis-based retailer's stock has been on a tear since early last month and traded in record territory for most of this month.

Shortly after trading began Monday, Target shares reached $75.99, a record high. They finished the day at $75.53, up 47 cents and a new record close.

That is a 38 percent increase from its 2014 trading low of $54.66, reached in early February when the company was still reeling from the aftershocks of the massive data breach it suffered during the holiday season a year ago.

Since then, Target ousted its CEO and directors tapped an outsider, Brian Cornell, to lead. Store traffic has been rebounding to nearly pre-breach levels and the economy has been improving, too. The perception that the holiday season was strong for retailers also lifted investors' sentiments for Target.

In recent weeks, several investment firms have dubbed Target a stock to watch in 2015.

"We like Target," Matt Nemer, a retail analyst with Wells Fargo, said on a recent conference call. "We think they're in the early stages of a retail turnaround."

Falling gas prices and Cornell's hiring have boosted the confidence of many analysts in Target. A better-than-expected third quarter that saw same-store sales in the U.S. grow 1.2 percent, its biggest gain in more than a year, has also buoyed optimism.

"New CEO Brian Cornell has sketched out a good plan for a strong brand," analysts at Wolfe Research wrote this month when they initiated coverage of the company. They called Target a "must-own equity."

Wolfe analysts said there is "significant potential" for higher revenues and profits next year as Cornell begins to implement changes to one of his key strategies laid out thus far — focusing on key categories such as beauty, health, baby and style.

"A great brand, a focus on the right categories, lots of new store growth opportunities, a strong demographic tailwind and a favorable economic backdrop all lead us to our outperform rating," the Wolfe report said.

But, of course, Target isn't completely out of the woods. It still faces steep competition from online retailers and is fighting industrywide declines in store traffic.

Other analysts think Target's Canadian stores will survive. Oliver Chen, an analyst with Cowen & Co., wrote earlier this month that while the Canadian division is a "work in progress" and will weigh on the company's results, he is encouraged by some improvements Up North and Cornell's fresh perspective to review those operations.

Chen issued an "outperform" rating for Target, noting the retailer's holiday execution "appears solid." He added that he sees an opportunity for Target to grow its digital presence, with online sales currently only making up about 2.5 percent of sales. Its online sales have been rapidly growing, up more than 30 percent in the last quarter.

Kavita Kumar • 612-673-4113