Target
I did a deep dive on Target. I hope this can add value to those who own or interested in Target.
Is a Target a buy here ? Or are we catching a falling knife ? Is the new CEO Michael Fiddelke in February 2026 going to reignite the Revenue and EPS growth going forward?
Stock : __Target _____ ticker : __TGT
Does TARGET has a strong economic MOAT ? No
Do I understand the business?
Retailer sell merchandise via 2000 stores (80.4% revenue) and digital channels (19.6%). Products lines: everyday essentials (food&confection), HBA, clothing, household items and differentiated discounted prices. Most of its stores are larger than 170,000 square feet. Its digital channels at Target.com also offering sale and revenue.
Competitors: Many !! ie Costco, Walmart, Amazon, etc and many clothing retailers
Company History and Leadership: Brian Connel (current chair&CEO) leaving position, Michael Fiddelke set to take over as new CEO on on February 1, 2026. Michael F ( cfo, coo >20yrs in company experience)- goal to drive top line performance and stop the decline is yet to be seen.Target has experienced mixed financial results in early 2025, including a sales decrease and stock volatility. The leadership has also encountered criticism and boycotts related to diversity and inclusion initiatives. >400,000 employees.
Target's financial performance has recently declined, with falling sales, lower operating income, and decreased comparable sales in its second quarter of fiscal year 2025 compared to the previous year. The company is facing challenges such as lower store traffic, inventory issues, and a customer backlash that began in late 2021, leading to a significant drop in its stock price and a stagnation of annual revenue for the past four years. In 2023 9 stores closed due theft. Retail shrink is high.
How are their fundamentals?
· Market cap: 40.05Billions compares other peers ie Walmart 815.86B,
· Revenue: 104.65B Revenue Growth rate 2% - forecast to grow slower than US market of 9.7%
· Beta : 1.15 volatility
· EPS: $2.05 (last earning Aug 2025). $8.86 /LY yearly EPS growth rate is 2.1% per year. In last 8 earning results mixed result of eps against analysts’ expectations in last 8 Quarters.
· P/E ratio:10.09(fair PE for sector is 22.8X)_forward PE:11.99 and trailing PE:10.27
***Walmart PE 38.80, forward PE 39.37 and trailing PE 38.6***
Dividend yield: 5.27%(gets $1.14/quarter) with a low mid 33.4% payout ratio so reliable and well covered. Dividend growth had increased over the last 10yrs.
· Operating margin:5.43% (slightly better than Walmart of 4.39%)
· Free Cash flow 6.39B negative/healthy cash flow?
· Debt level: 16.52B with 107.13% debt to equity. Moderate Net debt to Equity ratio. Still consider good capital allocation my Morningstar analyst report.
How is the Technical?
Sitting near bottom of Bollinger band, RSI 29.45 ( lowest rsi was 22 on Sept 19 2025) . Generally below 30 is oversold ). Currently sloping downward on the Ascending/accumulation channel “descending channel”, ranked __34/34_(not sure know what that means?)__ for stock performance. RERISTANT level found at $96 SUPPORT level not found yet and LONG position is $81.42.
What are their Negatives?
1. At all time low 52 weeks range 86.30-161.50. Current share price $86.56. almost -43.% change,
2. Zero economic moat -lack pricing or products differentiation ie grocery items are limited
3. Underperforming compared to same sector/industry Peers
4. Shares shorted – 3.55%
5. Technical? - good /bad? over sold
6. Last quarter and LY eps earning performance? 1.9% drop in revenue, 1.3% drop in traffic , and 0.6% average sale /basket
7. Economic uncertainty -shopping in dept stores cut back # of trips. No international exposure.
8. Debt is high compared to cash flow. Profit margin slightly decreased but not substantial.
9. A lot of shares were sold in May 2025 by CEO Brian Connel. More insider sellers than buying in the last 6 months
10. Latest 3 analysts have sell rating.
What are their Positives?
1. Relatively good manageable debt level -Their cash flow can cover 35% of their debt.
2. Good capital allocation
3. At all time low when the market is all time high – is poor performance compared to broad market ---we could interpret good or bad?
4. Lower interest rate- Interest payment will be better for their bottom line
5. Dividends are well covered by earnings. Reliable.
6. Ok balance sheet – manageable debt
7. Technical? Relatively safer entry and more toward support level since RSI is closer to bottom than top
8. Morning Stars rating: 5 stars- signal relatively a value stock
9. 17% upswing potential if Q3 is showing revenue and eps growth reignite.
10. 5.2% dividend yield. vs GIC or bonds lol ? But will shares dip more exceed div payout?
5
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Target
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