Target Is Down 35% in 2025. Is This a Once-in-a-Lifetime Buying Opportunity Before the Stock Goes Parabolic?

Target's (NYSE: TGT) shareholders would undoubtedly like to forget this year. The company's stock price has dropped 35.3% through Oct. 10. By comparison, the S&P 500 index gained 13.1% during this time.

Of course, just because the stock has underperformed doesn't necessarily mean it's a buying opportunity for investors. After all, the stock market incorporates information pretty quickly.

But has the market overreacted to short-term factors, or does this represent a buying opportunity for long-term investors? Investors will have to understand Target's business and the issues that the company is confronting before making that determination.

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Challenging economy hurts results

While Target offers basic, everyday items, it's become known for exclusive brands and differentiated offerings at its stores and website.

With persistently high prices, shoppers have seen their wallets squeezed. There have also been signs that the overall U.S. economy has been weakening, and the changing tariff policy has added another level of economic uncertainty. These factors hurt many retailers, including Target. You can see that by looking at the S&P 500 Retail index, which rose just 0.4% year to date in 2025 through Oct. 10.

Broad economic conditions have undoubtedly played a role in Target's sluggish sales. Fiscal second-quarter same-store sales (comps) for the period that ended Aug. 2 dropped 1.9%.

Other factors

There have also been management missteps that have caused comps to slump. These include a lack of the differentiating merchandise for which Target has become known, and the decision to pare back diversity, equity, and inclusion initiatives.

Management has been up front about the mistakes it has made regarding its merchandising strategy. That's why it's encouraging to hear incoming CEO Michael Fiddelke talk about changes involving improving store quality, offering trendier merchandise, and investing in technology. I applaud his decision to address these issues head on. The board of directors promoted Fiddelke, currently the chief operating officer, and he will formally start as CEO on Feb. 1.

Lastly, the company pulled back its diversity, equity, and inclusion initiatives earlier this year. This prompted groups to boycott buying from Target. Traffic accounted for 1.3 percentage points of the 1.9% quarterly comps decline, with lower spending responsible for the balance. However, management has taken steps to rectify the situation, including meeting with community leaders.

A buying opportunity?

If weaker sales were merely the result of larger economic forces, it'd be an easy decision to buy Target shares. But there are other factors at play.

I believe these will prove temporary. After all, management isn't going in a completely different strategic direction. It's merely returning to its roots that made it a very successful retailer. As far as the boycotts, as long as management keeps the dialogue open, I think the sides will reach an agreement.

Of course, there's risk involved. But the shares trade at an attractive valuation, which I believe makes it a risk worth taking. Target's stock sells at a trailing price-to-earnings (P/E) ratio of 10, down from 15 at the start of the year. The shares also sell at a much lower multiple than the S&P 500's P/E of 31.

Even with management forecasting sales will fall by a low-single-digit percentage this year, it expects adjusted earnings per share to come in at $7 to $9 compared to $8.86 in 2024.

The share price will benefit from the P/E multiple expansion and earnings growth once the company gets moving in the right direction. That gives Target a lot of upside for when it turns around sales and boosts profit growth.

Lawrence Rothman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.