Target has gained 66% in 2026 as its turnaround plan takes hold, with sales and same-store sales both rising in the first and second quarters. The stock still trades nearly 40% below its 2021 high, even as its valuation has climbed above its own five-year average.
Target has risen 66% this year, as of this writing, after a turnaround plan began showing results. The retailer has made 50 consecutive annual dividend increases, a track record that qualifies it as a Dividend King, and its rebound follows a stretch in which shares fell nearly 70% from their 2021 high. Yet Target remains roughly 40% below that peak, which leaves open how much further the recovery can go.
A turnaround built on same-store sales
Target built its business on a higher-quality shopping experience and higher prices than Walmart, its main peer, which competes on everyday low prices. As elevated inflation levels squeezed household budgets, shoppers shifted toward lower-cost competitors, and Target's revenue and earnings fell. Investors sold the stock hard enough to suggest doubt that the retailer could adjust.
The company instead worked through a turnaround plan that started bearing fruit this year. In the first quarter, sales rose 6.7%, with same-store sales up 4.4%. The second quarter confirmed the trend wasn't a fluke: sales climbed 5.3% and same-store sales rose 3.8%.
Valuation still below Walmart's
A 66% advance in a short period has pushed Target's price-to-sales and price-to-earnings ratios above their own five-year averages, a signal that the deepest value opportunity has likely passed. Those averages could be skewed low, though, given how depressed the stock was during the downturn.
Target's price-to-sales and price-to-earnings ratios are roughly 0.7x and 17x, compared with Walmart's 1.1x and 38x. In the early 2020s, Target's own ratios peaked around 1.1x and 23x. Because the stock is still nearly 40% below its 2021 high, there could be more room to recover toward those prior highs.
Room to run, but no longer cheap
Deep value investors should probably look elsewhere, since much of the recovery is already priced into the shares relative to their five-year valuation averages. Further gains are likely to require Target to keep posting strong quarterly numbers, and a shortfall could trigger a sell-off.
Source: The Motley Fool
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