Target (TGT) is likely to post better-than-expected gross margins in Q2 on sequential tailwinds, including lapping a larger merchandise margin headwind and lower tariff pressure, Bank of America Securities said in a Tuesday research report.

The brokerage forecast gross margin expansion of 90 basis points year over year, 20 basis points above consensus and said it increased its second-quarter and fiscal 2027 EPS forecasts by 3% each to $2.36 and $8.84, respectively.

The company is due to report Q2 results on Aug. 19.

Target demonstrated an impressive improvement in sales under new leadership, but concerns around the pace of EPS revisions and the sustainability of strong comp trends remain, analysts wrote.

The brokerage said it reiterated its underperform rating on the stock and raised its price target to $124 per share from $110.

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