Once a market favorite, Target (TGT) has struggled in recent years. The stock is down roughly 60% from its 2021 peak and about 40% over the past year, with another sharp drop earlier this week following disappointing Q2 earnings results featuring an unexpected CEO exit. The stock fell more than 6% on Wednesday’s market open, breaching its key $100 downside hurdle.
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Still, the downside may be largely priced in. At current levels, the valuation offers a reasonable floor, and investors can collect a 4.3% dividend yield while waiting for a potential recovery. Q2 results, though underwhelming, contained a few encouraging signs, and with a new CEO stepping in, there’s potential for a turnaround. With all the bad news now behind it, this beaten-down retailer could well be due for a bounce. As a result, I’m speculatively Bullish on TGT.
What Caused the Decline at Target?
Broadly speaking, Target stock has suffered for a variety of reasons. Inflation and an uncertain consumer environment have hurt the company’s business. The company twice found itself at the center of controversy with both sides of the political aisle, as it suffered a backlash from the political right over its Pride collection, and a backlash from the left based on the rollback of DEI initiatives after Trump’s election.
More recently, the impact of tariffs has been an overhang for the stock. Add it all up, and it’s been a maelstrom for the once-proud stock. Revenue and earnings per share both fell year-over-year in the most recent quarter, from $25.45 billion last year to $25.21 billion this quarter, while EPS fell from $2.57 a year ago to $2.05 today.
Green Shoots Sprouting
However, there’s reason to believe things are bottoming out. While revenue and earnings per share fell year-over-year, they actually both beat analyst estimates (albeit by slight margins), indicating that sentiment may be too low. Plus, looking at things sequentially, rather than year-over-year, revenue actually improved from last quarter, increasing from $23.8 billion in Q1 2025 to $25.2 billion this time around.
Similarly, while same-store sales, which measure revenue from stores open for at least a year (as well as online), were down 1.9% year-over-year, this was actually an improvement from last quarter, when they fell by a more alarming 3.8%. While the numbers aren’t exactly exciting, the sequential improvement means the green shoots of a rebound may already be sprouting. Digital sales increased 4.3% and sales in all six of Target’s internal categories improved quarter-over-quarter.
Target has also appointed a new CEO, Michael Fiddelke, effective February 1. Currently, the company’s Chief Operating Officer, Fiddelke, is a 20-year veteran who began as an intern and has deep knowledge of the business. He also leads Target’s Enterprise Acceleration Office, launched in May to support the turnaround effort. As CEO, Fiddelke has outlined three priorities: restoring Target’s reputation for unique and stylish merchandise, enhancing and standardizing the customer experience, and improving efficiency through greater use of technology.
Of course, execution will be the real test—investors can’t assume a turnaround on pedigree and plans alone—but it’s a credible starting point.
Discount Valuation
Much of Target’s lack of growth and current headwinds already appear priced into the stock. Shares trade at just 13.4x January 2026 earnings estimates—a notable discount in a market where the S&P 500 (SPX) fetches 22.1x forward earnings.
Looking further out, analysts expect Target to return to earnings growth in fiscal 2027, with EPS projected to rise from $7.39 in FY2026 to $7.90 in FY2027. On that basis, the stock trades at under 12.5x forward earnings, making it look even cheaper. While plenty can happen between now and 2027, the valuation suggests downside is limited, and expectations are already set low.
Dividend King
Target is also bolstering this inexpensive valuation with an attractive dividend yield. Shares currently yield 4.56%, which is more than triple the yield of the S&P 500 and almost 2x the sector average of 2.43%.
Beyond valuation, Target offers income appeal with a remarkable track record of consistency. The company is a Dividend King, having paid dividends for 56 consecutive years and raised the payout annually over that entire period. That kind of reliability is rare in today’s market, and Target is unlikely to jeopardize its status by cutting the dividend, making further increases over time the more probable path.
Is Target a Buy, Sell, or Hold?
Turning to Wall Street, TGT earns a Hold consensus rating based on eight Buys, 12 Holds, and four Sell ratings assigned in the past three months. TGT’s average stock price target of $105.59 implies almost 9% upside potential over the next twelve months.
Investor Takeaway
The past few years have been rough for Target and its shareholders, but I’m turning bullish. While recent results showed continued year-over-year declines, they also delivered modest sequential improvement—suggesting the worst may be behind the company and a recovery could be starting.
The appointment of a new CEO adds fresh momentum to the turnaround effort. Meanwhile, with the stock trading at a compelling valuation and offering a 4.56% yield, Target looks like an attractive opportunity for patient, contrarian investors.