Target (NYSE:TGT) stock popped in mid-August after the general merchandise retailer reported blowout second quarter numbers, which easily crushed expectations thanks to a surge in consumer bulk buying behavior amid the novel coronavirus pandemic.

But Target’s blowout numbers are more than just a reflection of pandemic bulk buying.

They are a reflection of the strong retailer that Target has turned into over the past few years, thanks to relentless innovation and a heightened focus on elevating the customer experience.

To that end, Target isn’t a “one trick pony.” This company will continue to impress Wall Street with solid numbers long after the pandemic turns into old news.

As the company does, Target stock will rally to $200.

Here’s a deeper look.

Strong Target Earnings

Target’s second quarter earnings report was fabulous.

Comparable sales rose 24.3%, the best mark ever for the company. Perhaps more impressively, that 24.3% rise in comps was driven by bigger average transaction sizes and by more traffic, with traffic up 4.6% in the quarter. That latter part stands out, because Walmart (NYSE:WMT) just reported a 14% drop in traffic in the same quarter, and one would reasonably expect consumers to be going into Target stores less during the pandemic.

Not the case.

So, Target isn’t just winning because of the pandemic. The retailer is winning more than anyone else during the pandemic.

Beyond the headline comp number, digital sales rose 195% year-over-year. Revenues rose 25%. Gross margins expanded 30 basis points thanks to lower discounting and higher sell through rates. Operating margins expanded 280 basis points, because SG&A dollars rose just 14% in the quarter (versus 25% revenue growth), so you had tons of positive operating leverage.

On top of all that, management said on the conference call that August comparable sales are trending up low double-digits. That’s welcome news to investors, who just a few days ago, heard Walmart management say that comps are slowing back to sub-5% ranges.

All in all, then, it was a really tremendous quarter from Target — one wherein Target didn’t just benefit from pandemic bulk buying, but also executed flawlessly against that favorable backdrop to report the best number in the business.

An Impressive Transformation

Zooming out, Target’s strong second quarter numbers aren’t a “pandemic thing.”

The quarter is more broadly representative of a retailer that has undergone an impressive transformation and is emerging as one of the strongest retailers in the world.

A few years back, Target was fumbling. The company was behind on e-commerce, didn’t have omni-channel capabilities and lagged in the one-stop-shop category. Since then, Target has built out one of the strongest e-commerce businesses in the retail world, developed robust omni-channel capabilities and expanded aggressively into groceries and other ancillary markets to more effectively turn its stores into one-stop-shops.

Customers responded by shopping at Target more.

Assuming comps come in this year at approximately 10%, cumulative comparable sales (on a stacked basis) will be up 20% since 2016. That is extremely impressive for a general merchandise retailer of Target’s size and age.

More importantly, this big growth won’t slow anytime soon.

Target has all the right pieces in place (a strong digital business, super-convenient omni-channel features, low prices and tons of product selection) to continue to win in the retail space for several years.

So, long after the pandemic passes, Target will sustain strong comparable sales growth. That sustained growth will continue to power Target stock higher.

Target Stock to $200?

My numbers indicate that Target stock could fly to $200 over the next few years.

Here’s the math.

According to eMarketer figures, Target has consistently controlled about 1.4% of the U.S. retail sales pie over the past few years. That market share looks positioned to jump to 1.7% or higher this year. But pandemic bulk buying behavior won’t last forever. Target’s market share will fall back post-2020. But it will likely remain elevated from pre-Covid levels, simply because Target is doing everything right to win market share and because consumers are — now more than ever before — placing immense value on the one-stop-shop experience.

Assuming that market share settles around 1.5% to 1.6%, then I see Target’s revenues growing at a 2%-plus pace to over $95 billion by 2025. Gross margins should improve as demand trends remain strong and an increased emphasis on private label sales relieves discounting pressure. Positive operating leverage should be a factor — albeit a small one — as management continues to exercise cost discipline.

Net net, my modeling suggests that Target will be able to do about $12.50 in earnings per share by 2025.

General merchandise stocks typically fetch a 15-times forward earnings multiple. But Target is increasingly showing us that it’s not just your average general merchandise retailer. It’s among the highest quality gen merch retailers out there. To that end, a premium multiple of 20-times forward earnings feels warranted.

A 20-times forward multiple on $12.50 in 2025 earnings per share implies a 2024 price target for Target stock of $250. Discounted back by 8.5% per year, that implies a 2021 price target for the stock of nearly $200.

The Bottom Line on Target

Target has been, still is and will remain one of the best retail stocks to buy in the stock market.

That’s simply because, with Target stock, you have an innovative management team that’s executing flawlessly, against a favorable consumer spending backdrop that is shifting towards ultra-convenient one-stop-shops, with a stock price that remains persistently discounted.

That’s a winning a combination today. And it will remain a winning combination for the next few years.

So stick with Target stock.