Is Target’s 35.5% Stock Drop in 2025 an Opportunity or a Warning?

• Wondering whether Target’s recent share price makes it a bargain, overpriced, or somewhere in between? You’re not alone. This article is here to cut through the noise and help you get to the bottom of the company’s true value.
• Target’s stock has dipped by 2.5% over the past week and is down a hefty 35.5% for the year so far. This has sparked new questions about whether the market has overreacted or if more challenges could be ahead.
• Recent headlines have focused on changes in consumer spending, with many retailers, including Target, facing pressures from shifting shopping habits and ongoing supply chain disruptions. At the same time, evolving trends in e-commerce and in-store experiences have shaped broader market expectations and played into these latest price moves.
• On our proprietary valuation score, Target racks up a 5 out of 6 for being undervalued in nearly every check we run. However, before you jump to conclusions, let’s break down how all the classic valuation tools stack up for this retailer, with an even smarter way to assess value coming up in the final section.

Find out why Target's -40.6% return over the last year is lagging behind its peers.

Approach 1: Target Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today's dollars. This method helps investors gauge whether a stock is trading above or below its true worth based on fundamentals rather than market swings.

For Target, analysts estimate its Free Cash Flow (FCF) at $2.26 billion for the most recent year. Looking ahead, expert projections suggest FCF could grow to $3.49 billion by 2030. Only the next five years are based on analyst expectations, while the remaining projections are extrapolated. The model used here is a two-stage Free Cash Flow to Equity approach, which helps account for changing growth rates.

After discounting those projected cash flows back to today, Target’s intrinsic value is calculated to be $163.45 per share. With its market price trading at a 45.9% discount to this figure, the DCF analysis strongly suggests the stock is undervalued at current levels.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Target is undervalued by 45.9%. Track this in your watchlist or portfolio, or discover 894 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Target.

Approach 2: Target Price vs Earnings

The Price-to-Earnings (PE) ratio is often the go-to valuation tool for profitable companies like Target because it directly relates what investors are paying to the earnings the company generates. A lower PE can signal a more attractive entry point, but what counts as “normal” depends on a company’s growth prospects and its perceived risk. Faster-growing or lower-risk companies typically deserve higher PEs, while the reverse is true for slower growers or riskier plays.

Currently, Target trades at a PE of 10.2x. This is significantly below the Consumer Retailing industry average of 21.1x, and also lags the peer group’s 27.3x. At first glance, this suggests the market has set a much lower bar for Target compared to its rivals, possibly due to recent challenges.

Enter Simply Wall St’s “Fair Ratio,” a tailored benchmark that weighs up Target’s growth forecast, profitability, industry, market cap, and risk profile. Unlike standard comparisons to industry or peers, the Fair Ratio (17.8x for Target) adapts to the company’s unique situation and offers a truer sense of what a reasonable multiple should be.

Comparing Target’s PE of 10.2x to the Fair Ratio of 17.8x shows that shares are trading well below a reasonable benchmark. This indicates the stock could be meaningfully undervalued based on fundamentals, beyond just its peer group discount.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1421 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Target Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story about a company, where you explain how you think its future will unfold, what numbers you expect for revenue, earnings, and profit margins, and what fair value you believe that implies for the stock. Narratives make investing easier by connecting Target’s story to a financial forecast and then showing what that means for fair value, so you can see if the current share price looks attractive or not.

On Simply Wall St's Community page, Narratives are created and tracked by millions of investors with just a few clicks. You can review or build your own, drawing on the latest news and changes in earnings to keep your logic up to date. Narratives update automatically when new information is released, so your assumptions, forecasts, and fair value always reflect the most current data. For example, while some investors see Target’s fair value as low as $82 after recent headwinds, others with a more optimistic outlook set it as high as $135. Narratives let you see and make sense of these different viewpoints, helping you decide when it is the right time for you to buy, hold, or sell.

Do you think there's more to the story for Target? Head over to our Community to see what others are saying!

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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