of the S&P 500 Not much has moved this year after three years of double-digit gains. That’s less than three months away in 2026, so investors shouldn’t worry at this point. However, there will be a year where things go south – and this might be it.
At the same time, any stock that has gained this year has more or less beaten the market. And there is at least one surprise — the goal(NYSE: TGT ) — which has been losing value for years and is 55% from its highs but is 22% higher year-to-date.
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Is the target back in action? Or is it a temporary movement that won’t last?
Image Source: Target.
New CEO Michael Fedlak has only been in the position since Feb. 1, but he’s been in training since the announcement in August. He comes from the COO role, so he knows the company intimately.
It is not difficult for anyone to follow the target, whether as an investor or a seller, to see how the target is reduced. It has a problem with inventory, and its merchandise doesn’t resonate with its core consumer. Sales are increasing, while competitors are enjoying it Walmart and Costco Wholesale Continue to enjoy steady growth.
Fiddelke outlined a plan for Target to return to its roots as a fun place to shop, with a unique flavor and proprietary brands that offer style and value. It plans to open more new stores and rely on technology to expand its markets for next-day delivery, where it is always clear. In the fourth quarter, same-day delivery for members increased 30% year-over-year, and Target consistently outperformed in this area.
I think he nailed it when he explained what target customers are looking for:
Target is not an everything store. This is not what the guests want from us. They want a strong, trendy–A pre-classification that they can trust to deliver quality and value.
Now, investors need to see if management can translate this into higher sales and profits.
Target still has a long way to go to stabilize, but the market was enthusiastic about the fourth quarter results. Sales and comparable sales were down slightly year-over-year, but adjusted earnings per share (EPS) and adjusted operating income were up slightly. What the market tends to reward is the earnings beat, and adjusted EPS beat Wall Street estimates to $0.28.
The market also liked guidance for 2026 sales to increase by about 2% and operating margins to increase by 20 basis points. EPS is also expected to grow for the year.
The company plans to spend an additional $2 billion this year alone to modernize its stores and create more value for customers. This is expected to improve engagement and ultimately, sales.
That’s on top of the $5 billion it already earmarked for capital expenditures and includes updated floor plans, employee training and marketing. It expects to open 30 new stores and remodel 130 more this year and will open its 2,000th store later this month.
The market seems to have moved away from the target after it hit the downside. Even with this year’s gains, it remains well off its highs. The stock is very cheap right now, trading at 15 times trailing-12-month earnings and 19 times trailing-12-month free cash flow.
Also in its favor is that it is the king of dividends, and its dividend yield is 3.8% at the current price. Even if investors are unsure about where the stock price is headed, shareholders will benefit from reliable, high-yielding dividends. This reduces the risk somewhat.
If Target can sharpen its model and get back to what it does best, it could be an incredible investment. It’s still unknown, but since it’s already offering its share value, investors might want to buy a small piece now.
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Jennifer Seibel holds positions at Walmart. The Motley Fool has positions and recommends Costco Wholesale, Target, and Walmart. Motley Fool has a disclosure policy.
This past stock, down 55% from its all-time high, is beating the market this year. Is this the ultimate contrarian stock to buy now? Originally published by Motley Fool
