Analysts like advantages of Target credit-card deal
May 06, 2008: 03:38 PM EST
Analysts view Target move to sell stake in credit-card receivables business as positive
NEW YORK (Associated Press) - Analysts on Tuesday said Target Corp.'s deal to sell a stake in its credit-card receivables to JPMorgan Chase is a modest positive for the discount retailer.
Late Monday, the Minneapolis company said it would sell 47 percent of its receivables business for $3.6 billion.
JPMorgan analyst Charles Grom said he had anticipated that Target _ which began reviewing the business in September _ would sell its receivable position outright, but said with the actual structuring of the deal Target can boost its financial flexibility without tapping traditional capital markets.
In addition it "alleviates some credit risk going forward," Grom said in a client note on Thursday.
"With the company's credit-card review now concluded we believe the cloud of investors' concerns regarding credit risk may be lifted and we reiterate our 'Overweight' rating on shares of Target," Grom wrote.
Lazard Capital Markets analyst Todd Slater said in a note to investors on Tuesday that the deal has "numerous benefits," including decreasing credit exposure amid a weakening credit market, transferring risk to a third party and allowing Target to buy back more stock at a "depressed multiple."
He reiterated his "Buy" rating and $65 price target.
Target shares rose 31 cents to $53.50 during afternoon trading. The stock has traded in a 52-week range of $47.01 to $70.75.
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