Target Drops to COVID Lows: Buy the Dip or Cut Losses?

Key Points

• Target stock has now fallen to levels not seen since the COVID-19 pandemic, making the company a potential buy target for value investors.
• Wall Street analysts find the risk-to-reward ratio present in the stock today. 
• Institutional capital has been flying into Target stock to reiterate this favorably bullish setup.

Investors rarely get a chance to pile into some of the United States’ leading names in the economy at discounts. Today’s opportunity comes within the retail sector, as a specific name has gone down to low prices not seen since the onset of the COVID-19 pandemic outbreak, making this opportunity a proverbial no-brainer buying potential moving forward into the rest of the year.

This chance at a fantastic risk-to-reward ratio comes through shares of Target Inc. NYSE: TGT, one of the favorite supermarkets for America’s new generation and other demographics across the nation. While not as institutionalized or entrenched as Walmart Inc. NYSE: WMT or even Costco Wholesale Co. NASDAQ: COST, Target does hold enough of the underlying market to justify investors taking a second look into its story.

Understanding this favorable risk-to-reward ratio setup in shares of Target, some Wall Street participants have been spotted buying the stock ahead of a potential recovery in the coming months. Investors need to understand that the main reason for the discounts today is primarily related to the threat of trade tariffs in the United States, though this might have now been overdone.

Unbelievable Discounts and Upside

As of today, Target stock has delivered a pretty bearish decline of as much as 20% on a year-to-date basis, bringing the stock to a deeply discounted level of only 58% of its 52-week high. When investors zoom out for a second, they’ll realize that this discount might have already priced in any bad news that could potentially come to Target’s business.

Whether through inflation, consumer spending trends, or even tariff threats, most of these potential outcomes cannot possibly cause the stock to fall any further. This is especially true as the stock is now at the same price as it was during the peak months of COVID-19.

In essence, this would be like saying the world today is under the same threats as it was back in those years, with lockdowns and layoffs coming from left and right. This is fundamentally untrue today, and therefore, it justifies the thought of Target stock being perhaps overly sold.

Some in the market believe this to be the case, and they were willing to express this view as well. Analysts from Oppenheimer decided to keep their Overweight rating on Target stock as of March 2025, this time also placing a $150 price target on the company.

According to this view, Target stock could rally by as much as 42.3% from its current position. However bullish this view is, there are other obvious benefits to taking a look at (or even buying) Target stock today.

Reasons Institutions Bought Target Stock

Even if this double-digit upside takes a bit longer to be realized, there is an added bonus to Target stock today. Management has kept the $4.48 per share payout for shareholders to enjoy in the form of dividends, which at today’s low prices would translate into an annualized dividend yield of as much as 4.25%.

This yield alone would be enough to outpace the inflation rates in the United States and cushion any potential volatility that new trade tariff announcements might bring to Target stock. Next to the double upside potential, these benefits might have been enough to justify new buying at some institutions.

Up to $4 billion in institutional capital has floated into Target stock over the past quarter, giving investors another bullish factor to lean on as a vote of confidence in Target’s future. Allocators from UBS Asset Management led the way in this recent buying.

This group decided to boost their holdings in Target stock by as much as 14.4% as of February 2025, bringing their net position to a high of $513.5 million today. On another discounted note, investors can now check where the stock trades relative to other peers in the retail space.

By trading at only 11.3x price-to-earnings (P/E) valuation multiples, Target stock is now sitting at a massive discount from the 24.0x average valuation in the broader retail sector. This allows investors to access one of the safest business models in the defensive areas of the market at over 50% discounts today.

Remembering that, as volatility breaks out in the broader S&P 500 index, capital might find defensive areas like supermarkets (like Target) that trade at such discounts more attractive than anything else the market can offer in the coming months.