Target has gotten torched over the last six months - since January 2025, its stock price has dropped 24.2% to $105.20 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in Target, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Target Not Exciting?

Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons why we avoid TGT and a stock we'd rather own.

1. Shrinking Same-Store Sales Indicate Waning Demand

Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Target’s demand has been shrinking over the last two years as its same-store sales have averaged 2.3% annual declines.

2. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Target’s revenue to stall, a deceleration versus This projection doesn't excite us and indicates its products will see some demand headwinds.

3. Low Gross Margin Reveals Weak Structural Profitability

We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate product differentiation, negotiating leverage, and pricing power.

Target has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 28% gross margin over the last two years. Said differently, Target had to pay a chunky $72.03 to its suppliers for every $100 in revenue.

Final Judgment

Target’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 12.3× forward P/E (or $105.20 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

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