Will Target Stock Recover?

A tight budget isn’t the only reason Target attracts shoppers. In fact, the average Target customer is a suburban mom who falls into the Millennial generation and has a household income of around $80,000 per year.

This group of shoppers likes the convenience of getting groceries, household items, and clothing in a single location, and they appreciate the value that comes along with Target’s prices.

Target has settled into a sweet spot between Walmart and specialized retailers. It hasn’t pushed prices down so low that its methods have been called into question, like Walmart, but prices are low enough to attract shoppers at all levels of income. Approximately 80 percent of shoppers in the United States make a purchase at Target from time to time.

There are nearly 2,000 Target stores spread through all 50 US states and Washington, DC. Around 75 percent of the US population lives within ten miles of at least one location. The company employs more than 400,000 people, and it brought in $109 billion in revenue for 2022.

With all of these advantages, it’s easy for investors to assume that Target stock is a buy. However, Target stock is down a bit over 14 percent year-to-date. What’s going on? Why did Target stock drop? And more importantly, will Target stock recover?

Why Did Target Stock Go Down?

Right up until the middle of May, Target stock was chugging along at a steady pace. Yes, there were some price fluctuations, but nothing of concern. However, when Target announced its first-quarter earnings on May 17, 2023, everything changed.

The stock price started going down, and the negative trend lasted longer than anyone expected. By the end of May, Target’s market cap was $13.8 billion lower – the stock was down 19 percent.

At the beginning of June, it appeared that the stock found its bottom, but the reprieve was short-lived. A week later, Target shares lost more of their value. It wasn’t until the June 15th announcement of a dividend increase that Target stock finally evened out. It hasn’t recovered its pre-earnings-announcement price, but for the moment, it seems the decline is over.

Towards the end of May and the beginning of June, Target was forced into the national media spotlight after announcing a clothing line designed for LGBTQ+ customers and allies.

Anti-gay activists organized a boycott of the retailer, and Target’s Pride-themed displays in some conservative areas were scaled back and/or relocated to out-of-the-way parts of the store.

At the time, some analysts suggested that Target stock was dropping because investors were concerned that Target had alienated its core demographic with the Pride-themed merchandise. If so, they said, Target would have lower revenue in the coming quarters, which would inevitably depress share prices further. After all, they pointed out, Anheuser-Busch stock went down after Bud Light encountered a similar issue, and it has not yet recovered.

What Is The Prediction For Target Stock?

The analysts predicting doom for Target stock are very much in the minority. A vast majority of industry experts and analysts agree that the brief furor over Target’s Pride merchandise is nothing more than a blip.

While the backlash against the product line might have contributed to the drop in Target’s stock price, the first-quarter earnings report and macroeconomic headwinds were the primary causes.

Some industry experts have pointed out that Target and Anheuser-Busch have very little in common, especially when Bud Light is considered in isolation.

After all, Target shopper and Bud Light drinker demographics are markedly different. On top of that, demand for light beer has been declining for some time. In short, there is no reason to believe that Target stock will see any long-term impact from its support of the LGBTQ+ community.

Meanwhile, Target’s ability to keep prices reasonable without sacrificing quality or reputation has earned it a place as the third-largest discount retailer.

Only Walmart and Costco are bigger. In a period when all retailers are struggling to keep sales up despite high inflation and otherwise challenging economic conditions, Target has still managed to eke out a little growth in sales figures during the first quarter of the year.

Nevertheless, earnings per share are down due to higher interest expenses and increases in other operations expenses. That fact prompted the drop in Target’s stock price. If historical patterns hold true, the economy will turn around relatively soon, and Target will be well-positioned for additional growth when that happens. The bottom line? There is every reason to believe Target stock will recover its losses and go on to achieve new highs.

Is Target Stock A Buy?

In terms of whether to buy Target stock now or wait a bit longer, analysts’ opinions are mixed. A slight majority say hold if you own already and wait to make any additional trading decisions. Nearly the same number of analysts say now is the time to buy Target stock. The price is right, and the company is on track to see gains over the next 12 months and beyond.

Of the 29 analysts who weighed in on the 12-month price forecast, there was a low estimate of $130 per share (roughly on par with the current price), a median target of $170 per share, and a high price of $220 per share. The median target price would be a 30 percent increase over today’s share price.

Overall, Target’s status as a Dividend King with 51 consecutive years of dividend increases, its current dividend yield of 3.38 percent, its discounted price, its intense appeal to a desirable demographic, and its relatively solid financial state make Target stock a buy.

#1 Stock For The Next 7 Days

When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.

Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.

See The #1 Stock Now >>

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.