Target’s (TGT) Stock Woes Present Investor FOMO Opportunity

Big-box retailer Target (TGT) is courting severe heat. Before news that a pension fund had filed a class action lawsuit for defrauding investors, the retailing giant rolled back its diversity, equity, and inclusion (DEI) programs to align with shifting political and social mores.

If that wasn’t ugly enough, TGT stock absorbed a sizable hit to end last week, shedding 2.5% in late trade. Over the past year, TGT is down almost 10%.

In addition to the lingering controversies of the DEI roll-back — including calls for boycotting by labor advocacy groups — Target suffered from a mixed-sentiment jobs report. While the unemployment rate declined more than expected, the 143,000 jobs added last month were below forecast.

Despite the ugliness, there could be tremendous value in TGT stock, especially considering last week’s sell-off. For the patient, long-term investor, Target’s current troubles could eventually transition into a stronger, more resilient business. It is often said that every problem is an opportunity in disguise — TGT could be a case in point.

Lessons Learned from DEI Programs Can Assist TGT

People go to Target to shop, not to shape their political views. While it’s obvious, corporate executives have recently started toying around with the idea of presenting progressive ideals, likely hoping to rouse sales. However, Americans generally don’t like to be told what to do. Unless an issue is universally appealing — like the fight against cancer — it’s bound to wear thin.

Notably, Anheuser-Busch (BUD) found this out the hard way. In 2023, the company partnered with social media influencer Dylan Mulvaney to help spotlight the popular Bud Light brand of light beer. However, Mulvaney was a controversial spokesperson who is well known for documenting her gender transition on TikTok. Soon after, several conservative personalities expressed umbrage at the promotion.

To be sure, Anheuser-Busch’s business struggled to right the ship after the fiasco. While it took several months, near the end of 2023, BUD stock had recovered. The catalyst likely stemmed from the bread-and-butter narrative: people like beer, especially cheap beer. That’s a huge lesson that Target executives can learn and utilize.

In particular, management will almost surely realize that pushing a political view too strongly — especially if it’s isolated to specific communities rather than universal — can (and will) create a backlash. Stated differently, becoming overtly political is a high-risk, low-reward affair. Further, if programs such as DEI are to be eventually rolled back, they may ultimately harm disenfranchised individuals rather than help them.

Non-Farm Payrolls Spark Positives for TGT Stock

The latest jobs report is another factor that could help move the needle in the positive direction for TGT stock. Of course, the market responded negatively to the labor print, which also took down Target shares. However, the report also had some bright spots that could extend a helping hand to the big-box retailer.

Primarily, while the 143,000 jobs added in January were below the consensus estimate of 169,000, the retail sector represented a key highlight, with 34,000 jobs added. Notable gains were witnessed in the general merchandise retailers segment, with 31,000 jobs added. These stats imply strong hiring in the categories pertinent to Target, thus indicating healthy consumer demand.

Additionally, investors should be aware of wage growth. Specifically, average hourly earnings increased by 0.5% in January and have risen by 4.1% over the past 12 months. Naturally, rising wages can support consumer spending, which should be a net positive for Target.

Finally, the jobs reports for November and December were revised upward by 100,000 jobs. This bump-up suggests the labor market was stronger than previously reported, indicating potentially sustained economic stability and a more favorable retail environment. Again, these should be net positives for Target, making TGT stock a compelling opportunity.

Looking ahead to 2025, analysts anticipate that Target will post earnings per share of $8.67 on revenue of $106.38 billion this financial year. Right now, that puts the forward price-earnings ratio at 13.83x and the forward price-to-sales ratio at 0.57x.

Is Target (TGT) a Buy, Sell, or Hold?

Turning to Wall Street, TGT stock has a Moderate Buy consensus rating based on 15 Buy, 15 Hold, and zero Sell ratings. The average TGT price target is $146.61 per share, implying an 11.6% upside potential.

See more TGT stock analyst ratings

Target Controversy Set for Turnaround

Target is still a retail giant with a massive customer base. While the recent backlash hit hard, big brands have bounced back from worse. Management will likely steer clear of similar controversies in the future, focusing on business and performance rather than counterproductive marketing gimmicks. The lessons learned should already encourage investors that once the transitory bad news dissipates, TGT’s business units are strong and resilient, considering everything.

More importantly, the TGT’s fundamentals look solid as the stock currently trades at a discount. The U.S. labor market continues to show resilience and indicates consumer spending will not be drastically affected in the coming months. With retail job growth and rising wages, demand should hold steady. Volatility is likely to linger, but the current price dip in TGT stock could be an opportunity in disguise for opportunistic investors.

Disclosure.