3 Reasons TGT is Risky and 1 Stock to Buy Instead

Since April 2025, Target has been in a holding pattern, floating around $90.80. The stock also fell short of the S&P 500’s 26.5% gain during that period.

Is there a buying opportunity in Target, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.

Why Is Target Not Exciting?

We're sitting this one out for now. Here are three reasons why TGT doesn't excite us and a stock we'd rather own.

1. Shrinking Same-Store Sales Indicate Waning Demand

Same-store sales show the change in sales for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year. This is a key performance indicator because it measures organic growth.

Target’s demand has been shrinking over the last two years as its same-store sales have averaged 1.9% annual declines.

2. Low Gross Margin Reveals Weak Structural Profitability

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Target has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 28.1% gross margin over the last two years. That means Target paid its suppliers a lot of money ($71.94 for every $100 in revenue) to run its business.

3. EPS Trending Down

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for Target, its EPS declined by 4.2% annually over the last six years while its revenue grew by 5.4%. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Target’s business quality ultimately falls short of our standards. With its shares lagging the market recently, the stock trades at 11.7× forward P/E (or $90.80 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.

Stocks We Would Buy Instead of Target

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

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