Shift in Consumer Spending Challenged Target (TGT) in Q2

ClearBridge Investments, an investment management company, released its “ClearBridge Large Cap Growth Strategy” second quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the growth stocks rebounded from tariff uncertainty, with technology and communication services sectors leading in the return to a risk-on environment. The S&P 500 Index returned 10.9% in the quarter, while the technology-heavy NASDAQ Composite soared 17.7%. The benchmark, the Russell 1000 Growth Index, rose 17.8% in the quarter, outperforming the Russell 1000 Value Index. Against this backdrop, the strategy underperformed its benchmark in the second quarter. IT and communication services sectors contributed to the performance while the health care sector detracted. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second quarter 2025 investor letter, ClearBridge Large Cap Growth Strategy highlighted stocks such as Target Corporation (NYSE:TGT). Target Corporation (NYSE:TGT) is a US-based general merchandise retailer. The one-month return of Target Corporation (NYSE:TGT) was 6.93%, and its shares lost 28.55% of their value over the last 52 weeks. On July 3, 2025, Target Corporation (NYSE:TGT) stock closed at $104.06 per share, with a market capitalization of $47.28 billion.

ClearBridge Large Cap Growth Strategy stated the following regarding Target Corporation (NYSE:TGT) in its second quarter 2025 investor letter:

"After making progress on margin expansion through the first half of 2024, mass market retailer Target Corporation (NYSE:TGT) has more recently been challenged by continued shifts in consumer spending away from discretionary categories, like home and electronics, which make up the majority of the company’s sales and carry higher margins. Tariffs on imports from China are likely to further pressure Target’s business. Despite the company’s execution to protect margins in a difficult operating environment, we see risks weighted to the downside, leading us to exit the position."

Target Corporation (NYSE:TGT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 62 hedge fund portfolios held Target Corporation (NYSE:TGT) at the end of the first quarter, compared to 56 in the fourth quarter.  While we acknowledge the potential of Target Corporation (NYSE:TGT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Target Corporation (NYSE:TGT) and shared the list of stocks that Jim Cramer recently commented on. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of TGT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.