Where Will Target (TGT) Stock Be in 1 Year?

Target (NYSE: TGT), one of the largest retailers in America, was once considered a stable blue chip stock. Yet over the past 12 months, its stock declined 24% as the S&P 500 rose 12%. It's also trading nearly 60% below its all-time high from just over four years ago.

Target's digital sales soared during the pandemic, but its growth cooled off as the pandemic passed and soaring inflation curbed consumer spending. The Trump Administration's tariffs and politically motivated boycotts exacerbated that pressure as its inventory levels rose.

However, Target's stock trades at just 13 times forward earnings and pays a high forward dividend yield of 4.6%. It's also a Dividend King, which has raised its dividends annually for 54 consecutive years. Will that low valuation and high yield limit its downside potential over the next 12 months? Let's review the potential challenges and catalysts to find out.

Image source: Getty Images.

What are Target's biggest challenges?

Target's comparable store sales surged 19.3% in fiscal 2020 (which ended in Feb. 2020) and 12.7% in fiscal 2021. Its digital sales soared by the triple digits in both years as the pandemic drove more shoppers to its online marketplace.

However, its comps only rose 2.2% in fiscal 2022, declined 3.7% in fiscal 2023, and grew a mere 0.1% in fiscal 2024. The aforementioned macro and micro headwinds hindered its growth as it struggled with supply chain disruptions, sluggish sales of larger products (such as kitchen appliances, TVs, and outdoor furniture), and intense competition from other retailers.

Target utilized aggressive markdowns to clear its excess inventory, which resulted in a reduction of its gross margin from 28.3% in fiscal 2021 to 23.6% in fiscal 2022. Its gross margin bounced back to 27.5% in fiscal 2023 and 28.2% in fiscal 2024 as it lapped those markdowns, negotiated better prices with its suppliers, sold more higher-margin products, and generated more revenues from its higher-margin advertising and marketplace segments. However, its shrink rate (its percentage of inventories lost to theft) still rose as more shoplifters targeted its stores.

Target also faced boycotts driven by politics from both right-leaning and left-leaning groups. Its sales of LGBTQ-themed merchandise sparked a conservative boycott in 2024, and the rollback of its diversity, equity, and inclusivity (DEI) initiatives in early 2025 drove liberal shoppers to boycott its stores. All of those headwinds made Target's stock less appealing, and rising interest rates drove more of its income-oriented investors toward risk-free CDs and T-bills.

On the bright side, Target expanded its brick-and-mortar presence from 1,926 locations in fiscal 2021 to 1,978 locations in fiscal 2024, despite its comparable store sales growth decelerating. It also locked more shoppers into its same-day deliveries and Target 360 subscriptions.

What will happen to Target over the next year?

Target's comps declined in the first, second, and third quarters of 2025. It expects another decline in the fourth quarter, and a "low-single digit decline" in its full-year sales. For the full year, analysts expect the company's revenue and adjusted earnings per share (EPS) to decline by 2% and 17%, respectively.

For fiscal 2026, they expect Target's revenue and adjusted EPS to rise 2% and 5%, respectively. Its new 5-year plan to generate at least $15 billion in fresh sales growth by 2030 could support that stabilization. That turnaround strategy includes the expansion of its e-commerce marketplace, AI upgrades for its pricing and recommendation tools, a "reimagining" of some of its higher-growth product categories, new perks for its Circle 360 subscribers, and even more store openings. Like Walmart (NASDAQ: WMT), Target is utilizing its expanding network of brick-and-mortar stores as fulfillment centers for its online orders.

Michael Fiddelke, who was chosen to succeed Brian Cornell as Target's CEO earlier this year, will lead that turnaround effort when he takes the helm in February. Fiddelke has been with Target for two decades and is currently its chief operating officer, so he is likely to adhere closely to Cornell's strategies. However, investors might be hesitant to buy Target's stock as a turnaround play until they see how the new CEO fares in his first few quarters.

Target will also continue to face tough macro and competitive challenges over the next year. It's still growing more slowly than Walmart, and it may struggle to stand out in the crowded retail sector. Target's low multiple and high dividend should prevent it from sinking lower over the next year. However, I think it will still underperform the S&P 500 until its comparable store sales growth accelerates again.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.