Why This Wisconsin-Based Company Could Reward Patient Investors (Kohl's)

Over the summer, Kohl's (NYSE: KSS) became a meme stock. Scores of retail traders dove into the name during July, speculating that high short interest left the department store retailer's shares primed for a short squeeze.

However, while meme enthusiasm did give shares a boost, improved fundamentals have also played a role in the stock's 2025 rally. In late August, a well-received earnings release kept shares moving higher through mid-September.

Since then, however, enthusiasm for Kohl's has simmered down -- in large part, on renewed macro concerns. Still, if you assume this means the beginning of the end to a comeback for this stock, think again.

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From meme stock to comeback contender

Kohl's, headquartered in Menomonee Falls, Wisconsin, just outside of Milwaukee, is one of America's top retailers, but it's also been one of the names in the space experiencing significant headwinds. In recent years, inflation, falling consumer demand, and omnichannel competition have affected revenue and earnings.

To make matters worse, Kohl's has also contended with issues like a scandal earlier this year that resulted in the company's then-CEO resigning after just 100 days on the job. With this, it's not surprising that the stock fell from $60 to prices nearing $6 per share between 2022 and 2025.

That said, in recent months, Kohl's has made quite an impressive recovery. Again, this rebound was originally fueled by meme traders, but over time it became more tied to the company's improved fiscal performance and outlook.

In August, when Kohl's reported quarterly results for the fiscal quarter ended Aug. 2, the results handily beat sell-side analyst forecasts:

Updates to full-year guidance were also promising, with the company now guiding for a lower net sales decline than previously anticipated. It's also guiding for adjusted EPS (earnings per share) of between $0.50 and $0.80, up from the past outlook calling for full-year adjusted EPS of between $0.10 and $0.60 per share.

The big breakout has yet to arrive

In September, Citigroup analyst Paul Lejuez argued that improved same-store sales comps and increased web traffic point to better-than-expected results during the September and December quarters. Lejuez has a $19 per share price target on the stock, suggesting that a further climb lies ahead in the near term.

Over a longer timeframe, there may be the potential for even greater gains. Based on the aforementioned quarterly results, Kohl's appears to be experiencing success with its new strategy, focused more greatly on proprietary brands, and a further pivot toward an omnichannel retail business model.

If margins continue to improve, even if sales keep shrinking, the resulting improvements to profitability could lead to outsized gains for Kohl's. Better yet, in the event the turnaround fails to keep on moving the needle, perhaps due to macro issues like tariffs, there may be an alternate route to higher prices.

Years back, Kohl's arguably dropped the ball when it came to selling the company and/or its owned real estate. However, under pressure to deliver value, management may be more inclined to pursue these strategic alternatives. Based on the real estate assets, Morningstar analyst David Swartz believes that Kohl's could be worth as much as $40 per share.

Is now the right time to buy Kohl's?

It's far from certain whether Kohl's will continue to make a comeback. After all, alongside promising news, there have been a few red flags, including recent reports that the company was seeking to delay vendor payments.

Still, the retailer has a path to higher prices, thanks to the real estate "hidden value" catalyst. Patient investors with a willingness to ride out any further turbulence may see opportunity with this stock at current price levels.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.