Why Target stock isn't a buy despite being near its 52-week low

Experts will tell you that timing the market doesn't work. I tend to agree, but only to a point. And I'm usually not one to shy away from buying a stock near its 52-week low if I feel it's a solid business with lots of potential that's maybe going through a rough patch.

Target is not that company. As of this writing, shares are trading at $92.72, compared to:

• A 52-week-low of $85.36
• A 52-week high of $158.42

So now might seem like a buying opportunity.

The reality, though, is that Target shares are likely to fall in the next couple of years more so than rise. If you're a long-term investor, Target may be a buy if -- and it's a big if -- the company is able to get its act together.

Otherwise, I'd recommend staying far away from Target and focus on retail stocks with a lot more potential. 

There’s limited upside with Target stock – and a lot of downside

Simply Wall St puts the estimated fair value of Target stock at $101.52. Given the company’s current stock price, that means investors today may be looking at a roughly 10% upside if the stock bounces back. 

The holiday season is typically a strong season for retailers, so in the near term, it’s possible that Target will see a nice uptick in sales. Investors may find that encouraging, and Target’s stock price could climb on the heels of a good holiday run. 

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Beyond that point, things may get dicey again for Target. 

In recent years, Target has seen its share of challenges. The company has a lot of debt, a lot of competition, and a giant reputation problem it needs to solve.

Although Target used to be a big shopping destination, it's been falling out of favor with consumers as store conditions deteriorate and inventory remains inconsistent.

Rolling back DEI (diversity, equity & inclusion) initiatives earlier this year didn't help Target, either. That move alone triggered a massive backlash among consumers, including boycotts that contributed to declining sales. 

Target’s recent numbers look bleak

During Target's most recent fiscal quarter:

• Adjusted earnings per share fell 20.2% year over year
• Net sales fell 0.9%
• Comparable sales fell 1.9%
• Operating income fell 19.4%

This does not read like a winning company worth buying on the dip.

Why things may not get better for Target anytime soon

You may be tempted to scoop up Target stock while it’s relatively cheap. And to be fair, the dividend isn’t bad. 

But Target stock is cheap for a reason. Not only has the company had a fairly disastrous run these past few years, but things are unlikely to get better anytime soon.

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For one thing, Target, like many other retailers, is facing pressure from inflation and tariffs. If that persists, the company could be looking at even smaller margins. 

Plus, Target’s competition isn’t backing down. 

Walmart, a long-time rival, is not only investing in technology and upping its fashion game to lure in Target's audience, but it's also expanding its store footprint. Amazon, with its competitive prices, isn’t going away either. 

Competition aside, Target’s main problem right now is that it’s gone from a fun, trendy superstore to a wannabe bougie haven that can’t seem to figure out what its customers need most. For this reason, I’d stay away from Target stock, tempting as it may be to get in at a lower price point.

Maurie Backman owns shares of Target.

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