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The Stock Market Is Historically Pricey: Here's 1 Reason Target Is Still a No-Brainer Buy

The Motley Fool · 10/04/2025 07:32

Key Points

  • Shares of Target have fallen 40% over the past year even as the S&P 500 index has climbed around 15%.

  • While the market is hovering near all-time highs, Target is already in a bear market.

  • Investors need to watch Target's turnaround, not the general direction of Wall Street.

Target (NYSE: TGT) is one of the largest retailers in the United States. It is also a Dividend King, with over five decades of annual dividend increases behind it. And the business is struggling today, which has resulted in a material decline in the stock price. But it's a no-brainer buy for investors that like turnaround stories even as the broader stock market sits near all-time highs. Here's why.

Target is not hitting on all cylinders

In the second quarter of 2025, Target's sales fell 0.9%, with same-store sales off by 1.9%. Those are not good numbers, given that the business basically shrunk in the quarter. No wonder investors are so negative on the stock, having pushed the shares down around 40% over the past year even as the S&P 500 index (SNPINDEX: ^GSPC) has risen to record highs, up roughly 15%, over the same span.

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The board of directors isn't sitting around hoping for the best. It has brought in a new CEO to shake things up. The revamp will likely take some time, but given the company's status as a Dividend King, it seems likely that it will eventually succeed. After all, you don't create a dividend record like that without working through some rough patches.

What you are really buying here is a turnaround story. And that story will play out regardless of what happens with the S&P 500 index. That is the reason to think that Target is a no-brainer buy, assuming you like turnaround stocks. On the turnaround front it is worth noting that the second-quarter results were an improvement over the first quarter's results, with a notable increase in customer traffic. The worst could, in fact, already be over.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.