Does Target’s Weak Employee Confidence Signal a Hidden Opportunity for Shares in 2025?

Thinking about what to do with Target stock? You are definitely not alone. Whether you are already invested or keeping a close eye on the big red bullseye, recent weeks have been anything but dull. The stock has seen a modest bump over the last month, up about 1.8%. If you zoom out to the past quarter, it is up a much healthier 13%. That said, it is hard to ignore the rougher patch so far this year, with shares still down more than 23% year-to-date. There have also been some tough headlines, such as reports of employee dissatisfaction and the company dropping its price-matching policy. Meanwhile, competitors like Walmart are ramping up their perks, making the landscape even trickier for Target.

But here is where things get interesting. Despite these hiccups and competition heating up, the currently lagging stock price may actually tell a story of undervaluation rather than decline. Target notched a strong value score of 5 out of a possible 6 checks for undervaluation, which is the kind of number that should catch any savvy investor’s eye. It is easy to get sidetracked by news noise and short-term swings, but the real story might be underneath it all: is Target undervalued by today’s standards?

In this article, we will break down how various valuation approaches stack up for Target and compare what each has to say about the opportunity or the risk. By the end, I will also point out a smarter way to make sense of all these valuation methods for yourself. Let’s dive in.

Target delivered -23.6% returns over the last year. See how this stacks up to the rest of the Consumer Retailing industry.

Approach 1: Target Cash Flows

A Discounted Cash Flow (DCF) model is one of the main ways investors estimate a company's intrinsic value. It works by projecting how much cash the company is likely to generate in the future, adjusting each year's estimate back to present value, and adding those together for a total figure.

For Target, the latest twelve months of Free Cash Flow (FCF) comes in at $2.2 billion, a solid base by any standard. Analysts project this number to keep climbing, reaching roughly $4.4 billion by 2035. Over the next decade, projections gradually increase, with expected FCFs of $2.5 billion in 2026, $3.0 billion in 2028, and $3.5 billion by 2030.

When all these estimates are brought together and discounted to today's value, the DCF model puts Target's fair value at about $164.68 per share. Compared to the current share price, this suggests the stock is 36.0% undervalued. In other words, the model sees Target’s true worth as well above where the market currently has it.

Result: UNDERVALUED

Our DCF analysis suggests Target is undervalued by 36.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Target Price vs Earnings (PE Ratio)

The price-to-earnings (PE) ratio is often the preferred valuation tool for profitable companies like Target because it directly relates a company's share price to its earnings power. Investors favor this metric as it gauges how much they are paying for each dollar of current profits, which is especially meaningful for established, consistently profitable businesses.

Of course, what counts as a "normal" or "fair" PE ratio can shift with expectations around the company’s future earning growth and risk. Higher growth prospects and steady profitability can justify a loftier PE, while greater uncertainty or slowing growth usually demands a discount. Benchmarks help set the scene: Target’s current PE ratio is 11.4x, noticeably lower than both the Consumer Retailing industry average of 21.6x and the average of similar peers, which stands even higher at 30.7x.

This is where the Fair Ratio comes into play. Simply Wall St calculates this proprietary benchmark by weighing factors like expected earnings growth, profit margins, industry trends, company size, and unique risk factors. For Target, the Fair Ratio lands at 20.6x, almost double its actual multiple. Since Target is trading well below its Fair Ratio, this signals a significant discount relative to what would be expected for its outlook and fundamentals. In short, the PE comparison aligns with the DCF model’s message: Target appears undervalued at these levels.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Target Narrative

Rather than looking at just one set of numbers, Narratives offer a powerful way to make better investment decisions by connecting the story you believe about a company to a financial forecast and then to a fair value estimate. Simply put, a Narrative reflects your perspective about where Target is headed, tying together your views on its future revenues, margins, and growth into a single, easy-to-follow framework.

On Simply Wall St, Narratives are more than just ideas. They are accessible tools built into the platform and shaped by the community of millions of investors, making it easy for anyone to construct or compare realistic scenarios in just minutes. By building a Narrative, you can decide if Target looks attractive at current prices simply by comparing your calculated Fair Value to the share price. Narratives update dynamically whenever new news, earnings reports, or company updates arrive, so your outlook stays current and relevant.

For example, some investors might create a bullish Narrative for Target, expecting the company to reach a fair value of $135.00, while more cautious investors might see only $82.00 as justifiable based on their forecasts. Narratives put you in control, helping you invest with conviction and clarity.

Do you think there's more to the story for Target? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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