TGT

We rate TARGET CORP (TGT) as a Hold with a composite score of 56.2/100 at a current price of $115.80. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (70th percentile) and value (64th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (41/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

TARGET CORP holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 56.2/100 places it at rank #1128 in our full 7,333-stock universe. With a $41.6B market capitalization, TARGET CORP operates at meaningful scale within the Retail Trade sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue contraction of -1% combined with momentum at the 57th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 28% (-7.8pp vs sector) narrow to operating margins of 5% (+0.8pp vs sector) and net margins of 3.4%, yielding a gross-to-net conversion rate of 12%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $115.80, TARGET CORP is trading near fair value based on current fundamentals. Our value factor score of 64/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 15.8x (a 26% discount to the sector median of 21.4x), EV/EBITDA of 8.8x (near the sector median), P/B of 3.4x, P/S of 0.5x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to TARGET CORP. The stock presents a balanced risk profile: significant leverage (106% debt-to-equity) and the combination of leverage (106% D/E) and thin margins (3.4% net) amplifies downside risk. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (106% debt-to-equity); the combination of leverage (106% D/E) and thin margins (3.4% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 70th percentile and quality factor at the 51th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (70th percentile) suggests predictable business dynamics; a 6.14% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate TARGET CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 21.6%, and the balance sheet is managed within acceptable parameters (D/E: 106%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; TARGET CORP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 6.14% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, TARGET CORP receives a Hold rating with a composite score of 56.2/100 (rank #1128 of 7,333). Our quantitative framework assigns a Narrow Moat (41/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 57/100.

Our analysis supports a neutral stance on TARGET CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.