Is Target Stock a Hidden Gem for Patient Value Investors?

Target (NYSE: TGT) hasn’t had the best run lately. In fact, shares have slid 29.9% so far this year, a sharp contrast to the broader market, with the S&P 500 flat on the year. It’s a tough pill to swallow, especially when you consider Target was already on the back foot coming into 2025.

But here’s the twist, while the stock is under pressure, its dividend is doing some heavy lifting. Target’s been increasing its payout for 54 straight years, and at today’s price, it yields an attractive 4.67%. So naturally, income-focused investors are asking: Is now the right time to buy Target on the dip?

Let’s unpack the story.

Key Points

• Target’s stock is down over 29% in 2025, but its 4.67% dividend yield and 54-year payout streak appeal to income investors despite falling earnings and sales.

• Management is launching new products and tech upgrades, but past fixes haven’t stuck and competition from Walmart and Amazon remains intense.

• With a low P/E and depressed expectations, Target offers upside potential for patient investors, though a clear recovery hasn’t yet materialized.

Latest Earnings Pose More Questions Than Answers

First things first, Target’s latest quarterly results (Q1 fiscal 2025) didn’t inspire much confidence. Revenue came in light, and management’s outlook didn’t help either.

So what’s going wrong?

At the heart of Target’s struggles are two big problems, fewer shoppers walking through its doors and some messy inventory decisions.

Retailers always walk a tightrope with inventory, too much, and they’re stuck discounting to clear shelves; too little, and they miss out on sales. Target’s had issues on both fronts.

To complicate things, the company fulfills about 96% of its sales from its physical stores, even for online orders. So when foot traffic slows, it affects everything. One bright spot? Digital sales.

Target reported a 4.7% bump in comparable digital sales, with over 70% of online orders arriving within a day. That’s impressive but fast delivery isn’t free, and supporting a growing e-commerce channel while juggling physical store inventory has been a costly balancing act.

Can Target Turn Things Around?

Target isn’t sitting still. On its recent earnings call, the company laid out some plans to regain momentum. Management is rolling out more thousands of new items and putting renewed focus on the holiday season, which has historically been a strong driver of sales.

Management also announced the creation of something called the “Acceleration Office,” which sounds like a fancy name for a task force aimed at modernizing operations. The goal is to use AI and automation to improve efficiency, cut costs, and get smarter about inventory.

That all sounds promising, but investors have heard similar pledges from Target in the past that didn’t exactly pan out.

During their Q4 2024 earnings call, management also talked about reviving the “Tarzhay” brand experience, a tongue-in-cheek nod to Target’s more fashion-forward, feel-good appeal. The idea is to make shopping fun again, not just convenient.

The In-Store Experience vs. Value Shoppers

Target is built around creating a feel-good, in-person shopping experience. That model worked well when consumers were flush with stimulus cash and eager to spend. But in today’s economy, price-conscious shoppers are chasing bargains, and Walmart and Amazon are better positioned to deliver those.

Target’s challenge is that it still leans heavily on in-store sales while trying to win a digital arms race. That means the company has to get both channels right, and fast. Inflation, shifting shopping habits, and economic uncertainty have made that task even tougher.

While efforts like the Acceleration Office might improve things over time, it’s unlikely that Target pulls off a dramatic turnaround overnight. There are just too many moving parts, and growth is still heading in the wrong direction.

Expectations Are Already in the Basement

If there’s one silver lining, it’s this, expectations for Target couldn’t be much lower right now. When the top brass openly acknowledges it’s facing headwinds and that recovery will take time, it resets the bar for key metrics. That can actually be a good thing for long-term investors.

With shares trading around $95 and earnings forecasted between $7 and $9 per share, Target is sporting a price-to-earnings ratio that is very reasonable. Indeed, it’s a steep discount compared to Walmart’s forward P/E 3x higher. For a company that’s still a Dividend King, that kind of valuation doesn’t come around often.

Target doesn’t need to hit home runs across the board to reward investors. Just stabilizing earnings, improving inventory efficiency, and nudging customer growth higher could be enough to lift the stock. Expanding its Target Circle loyalty program and striking smart partnerships could help too.

Is Target Stock a Buy?

Target is far from perfect right now. Growth has stalled, the digital shift hasn’t fully paid off, and competition is fierce. But for value investors who can stomach some short-term pain, the long-term reward could be meaningful, especially with that juicy dividend yield softening the ride.