Target Corp. (TGT) is web casting its annual shareholder’s meeting tomorrow (investors can watch it on the target.com (click on "Investors/Events + Calendar/Webcasts").

I’ll be tuning in especially after it reported today that profits dropped almost 8% at on softer-than-expected sales and higher costs. That being said, everyone’s favorite big box discount retailer still beat Wall Street earnings estimates for its first quarter. TGT trades for just 16 times current earnings (and 13 times next fiscal year’s eps projections). The stock also trades at a discount to competitors Wal-Mart (WMT), Costco (COST), and BJ’s Wholesale (BJ).

So why are TGT shares as red as their infamous logo? Go ahead and blame it on a lackluster earnings report, a worsening housing market…and yes, everyone’s favorite topic these days: the rising price of oil.

Throw in the mix that Wal-Mart (WMT) appears to be making inroads with customers searching for the lowest price during these tough economic times. Now wonder TGT shares fell 1.15 percent today to $54.29.

But these are temporary issues in my opinion. 

It seems investors scared off by this so-called economic slump are jumping ship even though the company remains solidly profitable. I think owning TGT in a diversified portfolio makes a ton of Rational sense… and I’m not the only one who thinks this.

Target is still a contender in Richard Band’s Profitable Investing Total Return Portfolio. In fact, he thinks that TGT will beat back Wal-Mart’s inroads once consumer income pick up again.

I agree. In fact, I’ve agreed for some time now.

Target is the undistributed pioneer of “cheap chic.” I expect consumers to start to “trade down” and buy more apparel at Target. While sales have been softer in discretionary items of late, such as apparel and electronics, we all know the consumer can’t bite the bullet for long…and Wal-Mart has been unsuccessful to date in tapping into that lucrative consumer discretionary income niche. When was the last time you walked into Target and walked out with more than you intended on buying?

Here’s another reason I’m not giving up on Target just yet: It just completed a deal with J.P. Morgan Chase (JPM) to sell 47 percent of its credit card receivables for $3.6 billion. These funds will provide liquidity for capital spending and share repurchases without having to access term debt capital markets. Not to mention that the company repurchased $1.6 billion of its stock last quarter.

I believe that favorable year-over-year comparisons will be coming in later this year and those numbers will be right on target!

Jamie Dlugosch

Editor, InvestorPlace