Target Stock Surges 24% After Beating Expectations

Five months ago, this writer predicted that Target's (TGT) stock would stay flat for the rest of the year. However, since then, it has risen by a significant 24%. The retailer had been struggling with declining comparable sales growth, shrinking margins, and a change in CEO. It was also facing inflation, stiff competition from Walmart and Amazon, and supply chain disruptions.

The initial concerns seemed justified, as Target's comps had declined for four consecutive quarters. However, the company surprised analysts by reporting a 5.6% increase in comps for the first quarter of fiscal 2026, with total revenue up 6.7%. It also raised its full-year revenue growth guidance to 4%.

The recovery was driven by rising store traffic, new products in high-growth categories such as food and health, and limited-time partnerships with brands like Woolrich and Pokémon. Target's adjusted operating margin is expected to improve more than 20 basis points this year as it sells higher-margin products and streamlines its supply chain.

At $148.88, Target's stock still looks attractive at 18 times forward earnings, with a forward yield of 3.1%. The company has raised its payout annually for 55 consecutive years, making it a Dividend King.