Target Is Up 58% This Year. Here's Why the Dividend King Has a Lot to Prove on Aug. 19.
Key Points
Target CEO Michael Fiddelke appears to have the big-box retailer back on track after a long dry spell for growth.
The fiscal Q1 results it released in May were encouraging, and included a significant upward revision to full-year revenue guidance.
The company will need to meet interim quarterly milestones to maintain this new bullish interest in this long-beaten-down stock.
It's been a surprisingly good year so far for Target (NYSE: TGT) shareholders. After several years of disappointing sales resulting in a broadly declining stock performance, shares of this retailer are up 58% year to date.
Simply put, investors are finally seeing a glimmer of hope for a turnaround. Total revenue rose 6.7% year over year in its first fiscal quarter, which ended in early May. That was driven in part by a 4.4% increase in foot traffic, resulting in same-store sales growth of 5.6%.
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Although analysts don't expect Target's fiscal second-quarter numbers to grow quite as much as they did in Q1, the company's still quite optimistic: When it reported in May, it doubled its previous full-year sales growth guidance from around 2% to around 4%. Management's also looking for earnings per share of between $7.50 and $8.50 for fiscal 2026 (which will end in late January). The analysts' consensus expectation is for earnings per share of $8.43.
The stock's recent buyers are essentially betting this big-box retailer will remain on track to at least meet those expectations, although some investors are also likely counting on better-than-expected numbers.
Image source: Getty Images.
This, of course, makes Aug. 19 a critical day for anyone betting on a continued turnaround. Although the company hasn't yet officially confirmed the date (it typically doesn't do so until the day before), most analysts expect Target to post its second-quarter results on that day. And those numbers will either affirm or call into question whether the retailer is truly on track to meet its full-year guidance.
On that score, the analyst community expects to hear that Target turned $26.08 billion in revenue into a per-share profit of $2.30 for the three-month stretch that ended early this month.
Just don't lose perspective: While every quarter is important for a company like Target that has so much to prove, one single quarter won't necessarily prove enough of anything for investors to make a true long-term call on this ticker.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.