Target Stock Surged After Announcing Earnings, but Is It Really Turning a Corner?

Shares of Target (NYSE: TGT) surged 7% in the trading session following its earnings announcement for the fourth quarter and full year of 2025. It was the first quarterly report since Michael Fiddelke became CEO, and with that, he announced a new strategic plan for growth.

Still, one day does not a trend make, and knowing that, investors may or may not believe Target stock has turned the corner. Looking at the plan, it seems increasingly likely that the retailer could begin a long-awaited recovery, and here's why.

Image source: Target.

Where Target stock stands

Despite today's gains, numerous problems have plagued Target since the pandemic, including high inventory levels, less compelling merchandise, messier stores, and the company's controversial political stances.

This has taken a toll on the company directly. The latest earnings report showed a 2% net sales decline in fiscal 2025 (ended Jan. 31, 2026) and a 9.7% drop in net income to $3.7 billion.

With that, Target trades at a discount of almost 55% from its all-time high. Also, even after the recent gains, the stock sells at a price-to-earnings ratio (P/E) of 15. This compares poorly to Walmart, which has long maintained positive sales growth and sells for 47 times earnings.

Looking forward

However, Target management forecast that net sales would grow by about 2% in fiscal 2026, perhaps signaling a turnaround.

To help achieve that, the company will spend $1 billion in 2026 to update stores, hire and train more personnel, and invest in AI and improved marketing. Also, it will increase its planned capital investment by more than $1 billion (for a total of $5 billion) to update and remodel stores and to improve its supply chain and technology.

It also plans to improve its product offerings, focusing on areas like home, beauty, women's style, and health and wellness. That is an encouraging sign since product assortment once gave it a reputation as a place to find affordable style. Also, Fiddelke, who first joined Target in 2003 as an intern, understands what the company was like when times were better, and that knowledge could help him as he seeks to restore its prosperity.

Nonetheless, making such plans a reality is different than announcing an intention. That means in the coming quarters, Fiddelke will have to show investors he is meeting these goals. The good news is that if he can, the aforementioned 15 P/E sets Target stock up for significant growth, giving investors a compelling reason to add shares.

The Target turnaround

Ultimately, Target's turnaround plan should boost its stock if the company can execute. That has become a challenge in recent years, and that is probably one reason the shares are far below all-time highs.

However, the company built a reputation for affordable style in the past, and with a CEO seemingly intent on restoring that reputation, those efforts could bode well for the stock. Meeting its targets would make its 15 P/E ratio absurdly cheap, creating conditions that could send the retailer's stock soaring if its turnaround plan succeeds.

Will Healy has positions in Target. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.