Time to Buy the Dip in Target's (TGT) Stock After Q1 Earnings?

Written By Michael Gary Scott






Analysis: Is Target’s Stock a Buy Opportunity Post Q1 Earnings?

Assessing Target’s Q1 Performance

Target’s stock, despite a 2% gain today, remains 7% lower following the announcement of its mixed Q1 results. The company reported an EPS of $2.03, slightly below the Zacks Consensus of $2.05 per share. Q1 sales at $24.53 billion exceeded estimates by a slim margin.

Evaluating Growth & Projections

Year-over-year, Q1 earnings experienced a 1% decline, while sales dropped by 3% from the comparative quarter. This was attributed to softness in Home and Hardlines categories, as well as reduced unit volumes and limited benefit from pricing power trends.

Future Prospects & Analysis

Zacks forecasts Target’s annual earnings to rise by 5% in fiscal 2025, followed by a projected 13% jump in FY26 to $10.60 per share. While FY25 sales are anticipated to dip to $106.81 billion, a rebound is expected in FY26, with sales rising by 4% to $110.78 billion.

Comparative Performance & Valuation

Year to date, Target’s stock is down 1%, trailing Walmart’s 22% gain and the S&P 500’s 12% increase. Over the last decade, TGT has risen by 159%, slightly above WMT’s 157%, but below the benchmark’s 190%.

Investment Opportunity

Trading at a P/E ratio of 15.2X forward earnings, Target presents an attractive valuation compared to Walmart’s 27.2X and the S&P 500’s 22.2X. Furthermore, Target currently trades below its decade-long high of 30.4X and at a slight discount to the median of 16.3X.

The anticipated recovery in Target’s earnings, coupled with its reasonable P/E valuation, makes it an enticing buy after the post-earnings dip. However, it is crucial to note that TGT currently holds a Zacks Rank #3 (Hold).

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