Target (TGT) stock is trading at multiyear lows, sparking investor concerns ahead of its Q4 earnings report on March 11th. This unease stems from a disappointing Q3 earnings miss and a cautious outlook for the holiday season, leading to a decline in sentiment. However, I believe the stock’s sour run is bottoming out. Given Target’s steady annual growth in comparable sales, a resurgence of demand for its discretionary items, robust e-commerce expansion, and a determined focus on omnichannel customer acquisition — TGT is in a strong position to deliver for its shareholders this year. I remain bullish despite the gloom.
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TGT shareholders have been underwhelmed for several years, with the stock currently trading 22% higher than five years ago. However, stocks don’t just reward shareholders with price appreciation; they can also reward them with dividend payments.
Depleted Investor Sentiment for TGT Stock
The broader economic backdrop has not been kind to retailers, and Target is no exception. Inflationary pressures have stretched many households’ budgets, leading consumers to tighten their belts. As a result, spending patterns are shifting away from discretionary products such as apparel and home decor to essentials like groceries and household necessities.
Major competitors, notably Walmart (WMT) and Amazon (AMZN), have seized on this trend by emphasizing value offerings and cutting costs. Target, meanwhile, reported lackluster Q3 EPS of $1.85, missing consensus estimates of $2.30. Although revenue grew slightly to $25.67 billion, it also came in well below projections, and comparable store sales grew by a mere 0.3% against an expected 1.5%.
CEO Brian Cornell attributed TGT’s difficulties to a volatile operating environment, specifically citing the effects of inflation, changes in consumer behavior, and the lingering repercussions of a brief ports strike that led to inventory bottlenecks. These factors, combined with higher digital fulfillment and supply chain costs, caused the company’s gross margin rate to fall to 27.2%. The pinch was particularly evident in discretionary segments like electronics and clothing.
TGT Dividends Offer Value Despite Gloomy Q4 Earnings Forecast
As Target prepares to announce its Q4 results on March 11, management’s subdued guidance has done little to inspire confidence. Projections for EPS range between $1.85 and $2.45, falling below analysts’ forecasts of $2.65. While the holiday season often acts as a sales catalyst, Target’s anticipation of flat same-store sales shows a wariness that stems from persistent inflation, shifting consumer priorities, and fierce competition. Thus, you can see why consensus estimates project sales of $31 billion for the quarter, implying a year-over-year decline of 3%.
Despite the near-term uncertainty, Target’s legendary capital returns track record and the stock’s depressed valuation suggest that the possibility of an upside appears strong. Capital returns-wise, Target has, without exception, increased its dividends for 56 consecutive years, which places it within the elite group of stocks known as the Dividend Kings.
Despite such a mature track record, the dividend’s compound annual growth rate over the past decade is 10.7%. The stock’s yield now stands at 3.6%, and it pays $1.12 per share. Thus, Target stock forms an ideal entry point for dividend-seeking growth investors.
It’s also worth noting that Target has ramped up buybacks lately, sustaining its long-term commitment to retiring shares. For context, the share count has halved over the past two decades. Therefore, with shares now trading at just 14.4x EPS for 2025 and 13.4x EPS for 2026, any ongoing repurchases should prove highly value accretive. They should also help the stock find a floor and set the stage for a price rebound. In fact, it’s worth noting that since Target’s average P/E has hovered close to 18x over the past decade, there is a strong chance TGT shares will appreciate if sentiment normalizes.
Is Target a Good Buy Right Now?
Wall Street maintains a Moderate Buy consensus rating on Target stock, based on 11 Buy, nine Hold, and zero Sell ratings issued over the past three months. TGT’s average price target of $150 per share suggests a potential upside of 21% over the coming 12 months.
Strong Dividend Record Fuels TGT Resilience
Despite a multi-year inability to increase its share price, TGT has other tricks up its sleeve. Short-term volatility and a cautious Q4 outlook may have undermined investor confidence, but Target’s strong dividend growth and aggressive share repurchases highlight the company’s commitment to rewarding loyal shareholders.
With the stock trading near multiyear lows, valuations appear cheap and attractive, potentially providing a price floor for bulls to rally around. Target’s strong brand, operational resilience, and history of shareholder returns, including a superb dividend record, should help sustain investor confidence and keep shareholder returns ticking along. As market conditions normalize, I believe TGT is set for a correction, reinforcing its reputation as a recession-proof dividend stock that shows strength in challenging retail environments.
