TARGET CORPORATION (TGT): what the price requires
At today's price, TARGET CORPORATION (TGT) is priced for +2.6% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/TGT
Headline
| Field | Value |
|---|---|
| Ticker | TGT |
| Company | TARGET CORPORATION |
| Sector / Industry | Consumer Defensive |
| Current price | $134.90/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 2.6% |
| Operating margin today | 4.9% |
| Margin compression implied | -2.3pp |
| Implied growth | 2.6% |
| Multiple paid | 16x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 8.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.6pp.
Reconcile: at the x-ray's 9.3% required return this reads ~9.7%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.27σ |
| cohort percentile (of 69 peers) | 33 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple; asset-based/earnings-power/growth-DCF land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.65x | 5 | expensive |
| Earnings | 2.48x | 4 | expensive |
| Relative | 0.63x | 3 | justifies |
| Growth | 1.53x | 4 | expensive |
Families that justify the price: Relative Families that call it expensive: Asset, Earnings, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.3%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $78.27 | 1.72x | yes | FCF base $3.0B, growth 1% (input: historical growth), terminal g 0.7%, WACC 7.3%, 5yr projection |
| DCF Exit Multiple | Growth | $138.53 | 0.97x | yes | Exit EV/EBITDA: 7.5x / 9.5x / 11.5x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $190.22 | 0.71x | yes | P/E 22x (static sector reference · 2026-04), scenarios: 18.6x / 22.0x / 25.4x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $31.38 | 4.30x | yes | Stage 1: -17% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $81.85 | 1.65x | yes | BV/sh $35.97, ROE (TTM) 21.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $122.48 | 1.10x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $100.28 | 1.35x | yes | Rev $106.4B, growth 1% (input: historical growth; tapered), Terminal P/S: 0.5x / 0.6x / 0.7x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $109.17 | 1.24x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $5.62B × (1−24%) / WACC 7.3% → EPV (no growth) |
| Residual Income | Asset | $116.67 | 1.16x | yes | BV $35.97 + 5yr PV of (ROE (TTM) 21.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $78.27 | 1.72x | yes | √(22.5 × EPS $7.57 × BVPS $35.97) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $212.80 | 0.63x | yes | EBITDA $7.94B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $40.82 | 3.30x | yes | FCF $3031.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $34.48 | 3.91x | yes | SBC-adj FCF $2.76B (FCF $3.03B − SBC $0.27B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $6.34 | 21.28x | yes | EPS $7.57 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $13.85 | 9.74x | yes | BV $35.97 × (ROIC 2.8% / WACC 7.3%) |
| P/Sales Sector | Relative | $466.77 | 0.29x | yes | Revenue $106.38B × sector P/S 2.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $81.84 | 1.65x | yes | EPS $7.57 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $11.9b |
| Net debt / NOPAT (after-tax) | 3.23x |
| Net debt / operating income (pre-tax) | 2.44x |
| Interest coverage | 10.5x |
| Share count CAGR (buyback) | -0.6% |
| Burning cash | no |
Bullet Takeaways
- Target's first quarter of fiscal 2026 broke a five-quarter streak of comparable sales declines: comps rose 5.6 percent on 4.4 percent traffic growth and net sales of $25.44 billion grew 6.7 percent, prompting management to raise full-year sales growth guidance to about 4 percent.
- The risk is durability, not solvency: the 10-K concedes that the ability to "positively differentiate ourselves from other retailers and provide compelling value to our guests largely determines our competitive position", and one good quarter against a soft comparison does not yet prove the turnaround holds against Walmart and Costco through the holiday season.
- Watch the next two quarterly prints for whether traffic growth persists and full-year EPS lands near the high end of the $7.50 to $8.50 guidance range as management now expects.
Bull Case
Big-box retail is valued on a simple contract: razor-thin margins, forgiven because scale makes them durable and traffic makes them compound. Target currently offers the sector contract at a discount. Its shares trade at roughly 18 times trailing earnings against a sector median near 22, and at about 16 times operating income the price asks for only 3.5 percent annual operating growth for five years, a pace within what the business has recently delivered. What the discount buys is a business earning a 21 percent return on equity on a 4.5 percent operating margin, the signature of a retailer that turns its assets hard rather than marking up its goods.
The first quarter gave the turnaround its first hard evidence. Comparable sales rose 5.6 percent, the first increase in five quarters, on 4.4 percent traffic growth, 8.9 percent digital comps, and same-day delivery volume up more than 27 percent; net sales of $25.44 billion grew 6.7 percent, and management raised full-year sales guidance by two points to roughly 4 percent growth. CEO Michael Fiddelke called the results stronger than expected and credited a clarified strategy driving broad-based growth. The mechanics behind that are the ones the 10-K describes as the differentiation engine: "a steady flow of exclusive products and designer collaborations" across the assortment, plus revenue streams beyond the register, since net sales include "advertising revenue and credit card" income that carries software-like margins relative to merchandise.
The capital story is quietly steady. Net debt of $11.9 billion sits against interest coverage of 10.7 times, the company is not burning cash, and the share count has drifted down about 0.6 percent a year over four years while the dividend continued. Target opened its 2,000th store in the quarter and plans more than 30 openings this year, reinvestment behavior from a management team that believes the traffic inflection is real. If comps merely stay positive, the sector-discount multiple and the raised guidance do the rest of the work without requiring any heroics from margins.
Bear Case
The advantage Target spent two decades building was a reason to drive past a Walmart, and that reason has been eroding. The 10-K names the terms of the fight with unusual candor: competitive position rests on "guest perceptions regarding our shopping experience, the safety and cleanliness of our stores, our ability to offer products at affordable prices, the desirability and exclusivity of our offerings, our in-stock levels, the effectiveness of our digital channels and fulfillment", against a field the filing defines as everything from "drug stores, supermarkets, direct-to-consumer brands, and other forms of retail commerce". Five consecutive quarters of comparable sales declines before this spring's rebound recorded what that erosion looked like in the ledger. One quarter of 5.6 percent comps, earned partly against a prior-year quarter in which comps fell 3.8 percent, is a data point, not a trend.
The earnings base under the multiple is softer than the headline suggests. First quarter GAAP EPS of $1.71 was below the prior year's GAAP $2.27, even as it beat the prior year's adjusted $1.30, two bases worth keeping separate. Trailing free cash flow of about $3.0 billion runs well below trailing operating income of $4.8 billion, with the 10-K attributing inventory growth to earlier receipts and "inventory investments in select merchandise categories to support sales growth", and the turnaround itself costs money: 30-plus store openings and supply-chain investment are being funded while comps have only just turned positive. The cash-flow-based reads sit far below today's price for exactly this reason; the price capitalizes earnings the cash statement has not yet confirmed.
What the price requires is modest, which is the point: about 3.5 percent annual operating growth for five years is roughly the sector's ordinary expectation, so the bear case is not an extreme assumption but a fragile one. If holiday execution stumbles or price investment is needed to hold the recovered traffic, the operating income the 16 times multiple rests on shrinks, and the intrinsic lenses that already sit below the price, book-plus-profitability around 40 percent below, no-growth earnings power about 20 percent below, mark where the compression lands. A turnaround priced as a resumption of normal has little cushion for a second stall.
Valuation
The sector lens and the intrinsic lenses disagree about Target, and the disagreement is the valuation story. At $135.10 (July 10, 2026), the price sits roughly 30 to 40 percent below what sector peer multiples would defend, on both earnings and EBITDA bases; the company's own trailing multiple near 18 times earnings runs under the sector median of 22 times. Point the other lenses at it and the picture inverts: the price sits about 20 percent above the no-growth earnings-power read, about 65 percent above the book-value-plus-profitability read, and more than three times the trailing free-cash-flow read. That last gap is the informative one. Trailing free cash flow of roughly $3.0 billion sits well below the $4.8 billion of trailing operating income because of inventory and capital investment, which the 10-K ties to earlier receipts and merchandising support, so the cash-based lenses are pricing an investment year as if it were the permanent state.
What the price actually asks is mild. Inverted, $135.10 pays about 16 times trailing operating income and requires roughly 3.5 percent annual operating growth for five years, a pace within the company's own recent delivery and in the lower half of the peer multiple range. The raised fiscal 2026 guidance, sales growth of about 4 percent with EPS expected near the high end of $7.50 to $8.50, sits slightly above that required pace, which is what a within-range label looks like in practice: guidance and requirement nearly touching, with execution as the spread.
The balance sheet holds the downside. Net debt of $11.9 billion is about two and a half years of operating income on a pre-tax basis, interest is covered 10.7 times, the company is not burning cash, and the share count has edged down about 0.6 percent a year over four years. Nothing in the solvency picture forces an outcome; the valuation resolves on whether the first positive comp in five quarters, 5.6 percent on 4.4 percent traffic growth, was the start of the trend the guidance now assumes.
Catalysts
The May 20 print reset the year. First quarter net sales of $25.44 billion rose 6.7 percent, comparable sales grew 5.6 percent after a 3.8 percent decline a year earlier, traffic rose 4.4 percent, digital comps grew 8.9 percent, and same-day delivery expanded more than 27 percent; GAAP and adjusted EPS both landed at $1.71. On the strength of the quarter, management raised full-year sales growth guidance to about 4 percent, two points above the prior range, and pointed EPS toward the high end of the existing $7.50 to $8.50 band. The shares nevertheless fell about 4 percent on the day as investors weighed whether the rest of the year can match the first quarter, which frames the next two quarterly reports as the confirmation events: a second consecutive positive comp would convert one good quarter into a trend, and a stall would reopen the turnaround question under a new CEO.
The execution calendar beneath the prints: more than 30 store openings planned this year after seven in the first quarter, including the chain's 2,000th location, and continued scaling of same-day fulfillment, the channel growing fastest. Michael Fiddelke's clarified strategy, his phrase for the merchandising and operations reset, is the narrative under test; early signs he cited as encouraging become measurable in traffic and holiday-quarter market share. The guidance math leaves modest room for disappointment, so category-level commentary on discretionary demand and any price-investment signals in the back half are the tells worth reading.
Peer Cohorts (Per Segment, With Filing Citations)
Target (single segment) (reported)
- WMT (WALMART INC.)
- (no filing in the citation store)
- COST (COSTCO WHOLESALE CORP /NEW)
- (no filing in the citation store)
- BJ (BJ’S WHOLESALE CLUB HOLDINGS, INC.)
- (no filing in the citation store)
- DG (DOLLAR GENERAL CORP)
- (no filing in the citation store)
- DLTR (DOLLAR TREE, INC.)
- (no filing in the citation store)
- M (Macy's, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 earnings release, May 20, 2026 · Q1 2026 earnings release, May 2026 · CNBC, May 2026