Time will tell, but . . .

Target experts aren't too concerned. They argue that the strategy will take time to pay off. "I think it's still early," says Regina Lombardi, an analyst who follows Target at BBH Core Select Fund (BBTEX).

She thinks this Target game plan, along with a few other initiatives like expansion into Canada and the rollout of smaller-format stores over the next few years, will boost the retailer's earning power enough to suggest that the stock currently trades "significantly" below its intrinsic value. She won't say by how much, but this discrepancy explains why her investment firm took a position in Target last summer. Lombardi is worth listening to, because the fund she works for significantly beats competitors over the long term. It has a five-star Morningstar rating, the highest possible mark.

Trading for 12 times earnings, Target also appears cheap to David Abella who manages Rochdale Dividend & Income (RIMHX), which beats competing funds nicely. Target's median price-earnings ratio over the past several years is around 15, which suggests it may be inexpensive right now. The price-earnings ratio, which compares stock price to earnings, is a common measure of a stock's value.

Abella says he's looking closely at Target and may consider a purchase once there are more signs that Target sales and the economy are getting better. If the economy improves, Target stock "could be quite strong for a while," he says. "It's not something you have a one-month window to get into."

One problem to watch is Target's website. Last summer, when Target moved its website off servers run by Amazon.com (AMZN, news), the site suffered severe outages. It seems to be working better now, but we're dangerously close to peak holiday sales season, starting just around the corner with Black Friday. And the problems have been cropping up at a time when Target is trying to promote its site by offering REDcard holders free shipping. "They've got a lot of work to do in online sales," says Davidowitz. "But I look at it as potential."

That might be. But if Target doesn't get all the bugs out of its Website, Black Friday -- the day after Thanksgiving -- could give Target's cute mascot dog a black eye instead of the red ring it currently sports.

At the time of publication, Michael Brush did not own or control shares of any company or fund mentioned in this column.

Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.