Target’s Struggles Deepen: What’s Next for TGT Stock?
Target (NYSE: TGT) has fallen over 25% so far in 2025, underscoring a difficult stretch for the retailer. A mix of soft financial performance, leadership transition uncertainty, and competitive pressures has weighed heavily on investor sentiment. Despite modest earnings beats, the underlying story remains one of sluggish growth and eroding profitability.
While Target trades at a steep discount to the market, the valuation gap is more a reflection of weak growth than a hidden opportunity. Shares change hands at just 0.4 times sales and 12 times earnings, well below the S&P 500 averages of 3.2 times sales and 21 times earnings. Walmart (NYSE: WMT), by contrast, trades at roughly 37 times trailing earnings, reflecting its steady grocery-driven growth and dominant scale, while Costco’s (NASDAQ: COST) commands a much higher multiple of about 54 times earnings, supported by its membership model and consistent traffic gains. Target’s low multiples may suggest upside if fundamentals stabilize, but history shows that cheap stocks can remain cheap when momentum is lacking. We discuss more below.
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Leadership Transition Raises Questions
Target has tapped Michael Fiddelke, a 20-year veteran and current COO, to succeed CEO Brian Cornell in February 2026. The move offers continuity, but investors had hoped for an outsider to shake things up. Fiddelke faces a steep challenge—revamping assortments, improving stores, and boosting technology to counter Amazon, Walmart, and Costco. The second quarter underscored the task ahead: revenue of $25.2 billion and EPS of $2.05 edged past estimates, but comparable-store sales fell 1.9%, margins narrowed, and free cash flow weakened.
Growth: Negative Momentum
Target’s growth has stalled, with revenue averaging a 0.3% decline over the past three years and slipping to $106 billion, down 0.7% from last year. The latest quarter saw another 0.8% drop, compared with steady mid-single-digit gains for the S&P 500. Last four quarters’ margins also trail sharply: operating at 5.4%, cash flow at 6.2%, and net income at 4.0%, well below market averages. Persistent pricing pressure and elevated costs leave little room for earnings expansion.
Target’s balance sheet looks stable, with $19 billion in debt versus a $45 billion market cap (44% debt-to-equity) and a 5.1% cash-to-assets ratio comparable to peers. The cushion gives management flexibility, though it doesn’t offset weak operations.
Downturn Resilience: History of Underperformance
Target’s track record in downturns shows deeper drawdowns than the broader market:
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Inflation shock (2021–23): TGT fell 60.6% vs. 25.4% for the S&P 500. The stock has yet to reclaim pre-shock highs.
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Covid pandemic (2020): Declined 29%, slightly better than the S&P’s 34%, but rebounded quickly.
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Financial crisis (2008–09): Dropped 63.8% vs. 56.8% for the S&P, requiring four years to recover.
This history underscores Target’s vulnerability to consumer downturns.
What to Watch Next
Looking ahead, execution will matter most. Fiddelke’s approach to merchandising, store formats, and digital investments will be closely watched. Third-quarter results could serve as an early test, with any stabilization in comparable sales or margin recovery likely to lift sentiment. But if Target continues to trail its peers, investor pressure may persist.
Bottom Line
Target stock trades at a deep discount, but the gap reflects weak growth, thin margins, and a history of underperformance in downturns. With a leadership transition ahead and operational challenges mounting, the path to recovery looks uncertain. For investors, Target offers potential value — but only for those willing to bet on a turnaround and stomach continued volatility.
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