5 Reasons You Will Be Glad You Bought Target in 2025
MarketBeat.com | May 22, 2025 07:55AM ET
Target Corporation (NYSE:TGT) is struggling in 2025 and will take time for a sustained turnaround. However, its business remains profitable and a turnaround is likely, making it a deep-value, high-yielding retail stock trading at a generational low. Here’s a look at five reasons why now is a good time to buy it.
Target: The Technicals Indicate the Bottom Is In
The technical action is telling. The market reached its bottom in April and is confirming it in May. The bottom is marked by a capitulation sell-off to below a critical, long-term support line, a volume spike, diverging indicators, and the ensuing consolidation/congestion band.
The confirmation is marked by the late May price dip sparked by the Q1 earnings results and guidance update, a price dip used as a buying opportunity based on the candle formed.
The candle formed is critical, indicating buyers are overtaking sellers at these low prices, and the indicators compounded the signal again.
MACD, the momentum indicator, shows bulls remain in charge, and the stochastic reflects an increasingly strong support base.
Can Target Move Lower? Yes, But It Is Unlikely, Given the Value and Yield
Target share prices can surely move lower despite the technical signals given, but they are unlikely to do so given their value. The stock is trading at less than 12x its current year forecast and at roughly 6x the 2035 outlook, assuming the company can regain traction and revert to growth. In this scenario, the stock price could increase by 300% and still be cheap relative to its primary competition. Walmart (NYSE:WMT) trades at 37x earnings in 2025.
Additionally, at these levels, the yield is too good to ignore. The stock is yielding above 4.5% and well above the high end of the historical range. The payout is also reliable at roughly 56% of the 2025 guidance.
The only downside is that the pace of distribution growth is slowing. The company runs a double-digit distribution compound annual growth rate (CAGR); investors should expect upcoming distribution increases to run in the low single-digit range until revenue and earnings growth can be reinvigorated.
Target’s Balance Sheet Is a Bullseye for Investors to Focus On
Target posted a negative cash flow for the quarter in Q1. However, the operation is profitable; the cash reduction is tied to debt reduction and increased inventory, improving its financial and operational positions.
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The balance sheet details at the end of the quarter include reduced cash offset by increased current and total assets and an 8% gain in shareholder equity.
The leverage remains low at less than 1x equity, and share buybacks are part of the equation. The buyback pace may also decelerate, but is unlikely to cease entirely without a substantial deterioration in the business outlook. As it is, buybacks reduced the count by an average of 1.6% diluted in Q1, and sufficient capital remains under the existing authorization to sustain them for several more years at a similar pace.
Target’s Q1 Results Weren’t Awesome, But the News Isn’t All Bad
Target struggled in Q1 with revenue contracting by 3%, more than expected, and margins under pressure. However, the 3.8% decline in comp store sales is offset by increases in digital channels and holiday seasonals, underscoring its strengths, including loyalty among the core demographic.
The company also announced the establishment of an acceleration office intended to speed up decision-making and strategy implementation.
Target Institutional Activity Ramps to Multiyear Highs, They’re Buying
The institutional activity appears to align with the recent bottom in Target’s price action, suggesting growing confidence in the stock’s recovery. The institutional activity ramped to multi-year highs in Q1 and Q2 2025, including buying and selling, but remains bullish on balance.
According to MarketBeat data, institutions netted more than $3 billion ahead of the earnings release, providing a tailwind for the market.
The tailwind is strong because the institutions own about 75% of the stock, which is unlikely to cease now. The more likely scenario is that institutions continue nibbling at this high-yield Dividend King while waiting for the business rebound to take hold.
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