Target stock achieved its longest winning streak in more than seven years on Tuesday afternoon. Just don’t take the rally as a sign that the retailer’s business is thriving.
Target shares have risen for 10 consecutive days, gaining about 8.8% through the period, according to Dow Jones Market Data. It is the stock’s longest winning streak since May 21, 2018, when the stock was rising ahead of the company’s earnings report for the fiscal first quarter.
The stock closed marginally higher at $97.67.
Carey Kaufman, consumer strategist at Jefferies, notes that Target’s latest winning streak is part of a broader rally among some of the most “unloved” names in the consumer discretionary sector, such as Kohl’s, VF Corp., and Abercrombie & Fitch.
Once viewed as a retail winner, Target has suffered from a dearth of merchandise, skimpy staff, and messy stores. High inflation and economic uncertainty exacerbated those issues, prompting consumers to spend less on the discretionary items that have long been Target’s forte.
Annual revenue has declined for two consecutive fiscal years, falling 1.6% year over year in the fiscal year ended January 2024, and 0.8% in the fiscal year ended this January. The company’s same-store sales have declined for three consecutive quarters, prompting executives to cut their financial guidance for the fiscal year.
The shares have shed about 33% over the past three years. The S&P 500 has gained 76% in the same period.
Target is taking steps to remedy the problem. It recently named a new CEO, Michael Fiddelke. And the company is planning on investing $5 billion in 2026 alone to improve its stores and merchandising strategy.
Nascent optimism about a potential turnaround may be part of the reason shares are higher. But it isn’t the main reason behind the current winning streak. Experts say real change will take time and money, and it doesn’t help that recent data paint a mixed picture of consumer demand.
It is more likely that the stock’s cheap valuation—shares traded at about 11 times next years’ earnings in early December—made it an obvious candidate for investors looking to snap up lagging stocks ahead of a so-called Santa rally, Kaufman wrote.
Doug Busch, Barron’s’ senior technical analyst, flagged in late November that Target was ready for a breakout. At the time, he pointed out that the stock’s monthly chart suggested a “potential entry point,” and that a move toward $105 was possible by the end of the first quarter.
With the S&P 500 down about 1% in December, the Santa rally hasn’t materialized. But the Target rally has.
Now that the easy money has been made, however, Wall Street’s focus will shift toward whether new CEO Michael Fiddelke can successfully execute a turnaround, Kaufman wrote.
“There will be a profit taking, if not short included, move lower once we begin to position for the forthcoming new FY guide (btw…every investor would welcome a Rebase [of expectations]),” Kaufman wrote.
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