Target Corporation (NYSE:TGT) is emerging as a winner following the holiday season. The big-box retailer just reported robust holiday numbers that were well above expectations, lifted fourth quarter earnings guidance, lifted the 2017 earnings guide, and provided preliminary 2018 numbers that were miles above expectations. Target stock is up nearly 3% on the news to trade at its highest level since early 2017.

I’ve been bullish on a lot of retail stocks ever since rumors started spreading during Black Friday weekend that this holiday season was shaping up to be one of the best for retailers in recent memory. In December, the bounce back in consumer spending created a rising tide that lifted all retail stocks.

But now that numbers are starting to roll in from retailers, investors are separating out the winners and losers. Some retailers didn’t live up to the supercharged expectations — see Urban Outfitters, Inc. (NASDAQ:URBN). Other retailers did — see Kohl’s Corporation (NYSE:KSS).

Target stock is undoubtedly in the winner’s circle.

And the best part is that this rally still has legs. Target stock will head notably higher over the next several quarters.

Here’s why.

Target Is Fighting Back

For most of 2017, investors and analysts treated Target stock as if Wal-Mart Stores Inc (NYSE:WMT) would inevitably leave Target in the dust forever.

That thesis was just wrong.

Yes, Walmart was reporting better numbers than Target for most of 2017. And yes, Walmart was beating Target where it counts (digital). But this is nothing new.

These two all-in-one, big-box retailers are interlocked in a decades long competition wherein beatings are exchanged with equal frequency. Walmart beats Target for a few quarters. Then, Target bounces back and starts beating Walmart. Then, Walmart bounces back and starts beating Target. The cycle just goes on and on.

Right now, we are in the Target bouncing back phase.

Target just reported comparable sales growth of 3.4% in November and December, more than double initial expectations (1.5%). Comps were positive and accelerated from the third quarter in all 5 of the company’s core merchandise categories. Most importantly, Target’s digital business is on track to deliver its fourth consecutive year of 25%-plus growth.

The best news is that these tailwinds will continue into next year.

Target remains committed to building out more direct-to-consumer capabilities next year, including launching same-day delivery — the company just acquired a same-day delivery platform called Shipt. The company also plans to remodel a bunch of stores (which should drive more traffic), expand its exclusive brand offering (which should build customer loyalty), and open a handful of small format stores (which should extend audience reach).

Target expects comparable sales to rise in the low single-digit range next year. And more importantly, despite wage hikes and digital investments, Target expects top-line momentum to fuel stable core earnings in 2018.

That is big. The Street has been modeling for sizable earnings compression next year.

All in all, we are clearly in the “Target fighting back” stage. That bodes well for Target stock.

Target Stock Can Run Higher

Target is also a big winner as a result of corporate tax reform. Lower corporate taxes are expected to push earnings to $5.30 per share next year. Management also expects additional cash flow, which will go towards hiking the dividend and buying back shares.

Put it all together, and you get an exceptionally bullish narrative surrounding Target. Comparable sales growth is positive. Earnings are going up, and so is the dividend. Share repurchases are accelerating.

There is no reason investors won’t pay the long-term average 17-times earnings multiple for that strong of a narrative. A 17-times multiple on next year’s earnings of $5.30 implies a one-year forward price target of $90.

Discount that back by 10%, and you get to a present value north of $80.

Bottom Line on TGT Stock

Target is in bounce-back mode, and so is Target stock.

Because the valuation on Target stock was so depressed for most of 2017, this bounce-back will translate into a big rally. This stock will trend towards $80 over the next several months, and will likely head towards $90 by early next year.

In other words, this is not the time to sell.

As of this writing, Luke Lango was long TGT.