Target is one of the largest five retailers with about 1,978 stores in the US.
But its stock has been down since the 52-week high point. It is trading at $93.01 per share, with a P/E of around 10.
The large retailer reported net sales of $106.57 billion in fiscal 2024, down 0.79% year-over-year.
Net earnings came in at $4.09 billion or $8.89 per share for the full fiscal 2024, compared with $4.14 billion in the same period last year.
Currently, its market capitalization is only about $42 billion – is it a good opportunity to get in?
Stable Profitability
Net sales reached $106.57 billion and net earnings were $4.09 billion for fiscal 2024. Net margin clocked in at about 3.8%, the same as fiscal 2023.
Its net margin is slightly higher than about 3% in Walmart, its peer.
Solid Financial Position
Target’s total assets totaled around $57.77 billion, while total liabilities amounted to $43.1 billion in fiscal 2024. The debt ratio was 74.6%.
The debt level is acceptable, but its borrowing capacity may be reaching a limit.
Long-term debt and other borrowings was about $14.3 billion, while its free cash flow clocked in at about $4.48 billion.
The ratio of long-term debt to FCF is around 3.2, which is not high, but Target may need a large amount of cash to expand its stores from FCF.
Shareholder Yield
Dividend paid was about $2 billion, as stock buyback was about $1 billion. The combination of both led to a 7% shareholder yield, which is better than BIL, a 4.68% yield.
Though shareholder yield may be down with capital expenditures soaring, I believe that its shareholder yield is still outperforming a 5% yield.
Target, Not Walmart
Target is a good company, but it isn’t Walmart.
Currently, Target stock price is worth buying, however, Walmart stock is too expensive, trading at about 40 times earnings.
Risk and Opportunity
I think that the stock market is still elevated. Few stocks are undervalued or in a reasonable range. Target stock is one of the few stocks. Most stocks carry significant risk, while Target has a low multiple with stable profitability.
In the short term, it may be affected by Trump’s tariff war with China, but Target always benefits from long-term economic improvement.
More Capital Expenditures Heading Into 2025
“Capital expenditures in 2024 reflect investments in our strategic initiatives, including investments in both stores and in our supply chain enhancing our capabilities and guest experience across stores and digital channels. The decrease in capital expenditures in 2024 compared with 2023 primarily reflects a slowdown in store remodel activities.”
“We expect capital expenditures in 2025 of approximately $4–5 billion, with the majority focused on store assets, including both new stores and remodels, as well as continued investment in supply chain and technology projects. We expect to open about 20 new stores during 2025 and to resume a faster pace of remodel activities compared with 2024,” Target said in its 2024 Form 10-K.
Q1 of 2025 Earnings Results
Target posted its earnings results for Q1 of 2025 on May 12, 2025.
Net sales were $23.8 billion, down about 2.9% year-over-year.
It reported first-quarter GAAP earnings per share of $2.27 and adjusted earnings per share of $1.30 per share.
Net earnings were about $1.04 billion for Q1 of 2025.
Guidance
Target expects a low-single-digit decline in sales, and GAAP EPS of $8.00 to $10.00. Adjusted EPS, which excludes the gain from the litigation settlements in the first quarter, is expected to be approximately $7.00 to $9.00.
Valuation
Analysts that cover Target give an average price target of $105.06 per share, which would be about an 11.5% gain over the current stock price.
I agree with analysts’ view. Further, I think that Target could deliver a 50% gain within five years. It may be an opportunity for long-term investors.
Disclaimer: This is not investment advice.
