1 Growth Stock Down 41% to Buy Right Now

Target (NYSE: TGT) has missed the mark for shareholders in 2025, declining 22% year to date and seeing a 41% decline from its 52-week high. The big-box retailer has struggled amid shifting consumer spending trends, with the latest headwind being the uncertainties surrounding tariffs being implemented by the Trump administration.

Despite the disappointing performance, the company remains profitable and benefits from robust fundamentals, which keep shares positioned to stage a big rebound. Here's why I believe Target stock is a buy right now.

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Early signs of a turnaround

Target stands out among major retailers by combining discount pricing with a premium shopping experience, supported by a wide range of private labels and exclusive products that have captured a loyal customer base. While this approach has driven Target's success for decades, the company now faces the challenge of adapting to a tougher macroeconomic environment.

The fact that shoppers are increasingly opting for cheaper alternatives over big-ticket discretionary items has pressured revenue. This trend contributed to Target's underwhelming 2024 financial performance. For the fiscal year ended Feb. 1, net sales dropped 0.8% year over year, while adjusted earnings per share (EPS) fell 1% to $8.86.

Still, signs of a turnaround are emerging. In the fourth quarter, which includes the holiday shopping season, comparable sales rose 1.5% from the previous year, with store traffic up a solid 2.1%. Target's e-commerce business has been a growth driver, with digital comparable sales jumping 8.7% year over year.

Image source: Getty Images.

Company management is projecting confidence that its efforts to generate financial efficiencies will position Target for improved long-term profitable growth. Target CEO Brian Cornell has described a plan to gain market share. In the fourth-quarter earnings conference call, he said:

Our expectation is to drive more than $15 billion in revenue growth over the next five years. To get there, we have to hold or grow share across the majority of our categories. And with most of our categories, we've seen very positive momentum in this regard... Those tailwinds give us confidence in the year ahead and the overall long-term strength of our business.

For the year ahead (Target's fiscal 2026), the company is guiding for net sales growth of around 1%. More encouraging is the adjusted EPS target of $9.80, representing an annual 10.6% increase.

That's great news for investors thinking about the sustainability of the company's $1.12-per-share quarterly dividend, yielding 4.3%. Management reiterated its commitment to returning cash to shareholders, with the potential to extend the company's 53-year streak of annual dividend increases later this year.

Data source: Yahoo Finance. FY = Fiscal year. YOY = year over year.

Target's bargain valuation

Following the sell-off in shares of Target this year, some of the worst-case scenarios may have already been priced into the stock, offering the company some room to outperform a lowered baseline of expectations. Sales outpacing estimates could be the catalyst shares need to sustain a rally higher.

Even with concerns that some of its imported goods, including fruits and vegetables subject to new trade tariffs, could weigh on earnings, I believe indicators such as store traffic and comparable-sales growth will be more important to gauge the company's operational execution. This means that the market might be willing to overlook some near-term margin pressures if there is evidence that the brand momentum remains solid.

What I like about Target shares at the current level near its 52-week low is the compelling combination of deep value and long-term growth potential. The stock is trading at just 11 times its projected year-ahead EPS as a forward price-to-earnings (P/E) ratio. This level represents a deep discount to industry peers, including Dollar General at an earnings multiple of 16, or even Walmart stock, trading at a forward P/E closer to 34. By this measure, if the entire sector is facing similar headwinds, Target appears undervalued.

TGT PE Ratio (Forward) data by YCharts

So is Target a buy?

2025 will be a pivotal year for Target to prove its turnaround strategy is working. I'm optimistic and believe it's a great time for investors to buy some shares of this industry leader at a bargain price. Target's large dividend makes it an attractive high-yield income addition to diversified portfolios.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.