Two Wall Street analysts are getting bullish on a Target turnaround. Here's why

Target shares are up about 26% in 2026 after falling nearly 28% in 2025, as investors respond to its March turnaround plan. Morgan Stanley and Jefferies both turned constructive, with price targets of $145 and $140 implying 21% and 17% upside, respectively, versus Tuesday's close. Analysts see improving traffic, better category mix, and markdown discipline as the main drivers of a recovery, though the Street remains mostly neutral with 24 holds versus 12 buys/strong buys.

Analysis

The market is starting to re-rate TGT from a busted turnaround into a self-help compounder, but the important point is that the first leg of the move is probably not about top-line inflection so much as margin normalization. In a highly fixed-cost retailer, even modest mix improvement and fewer clearance events can create outsized EPS torque, which is why the stock can keep levitating before the sales data fully confirm the thesis.

The second-order winner is the vendor and private-label ecosystem tied to consumables and beauty: more shelf space and better in-stock execution typically shift bargaining power toward faster-turning categories and away from discretionary home/apparel vendors that had been leaning on promotions. That also implies pressure on mid-tier rivals that are still dependent on markdowns to clear inventory; if Target regains traffic without aggressive price investment, peers may be forced to respond with deeper discounting, which would delay their own margin recovery.

The consensus error is likely framing this as a slow traffic recovery rather than a P&L operating-leverage event. If the company stabilizes gross margin and SG&A absorption over the next 2-3 quarters, EPS can compound faster than revenue, and the stock can outgrow the narrative well before comp trends look impressive. The risk is that management overreaches on assortment changes and beauty/grocery mix shifts displace higher-margin categories or create execution friction in stores, which would show up first in ticket growth and replenishment lead times.

Near term, the stock is more vulnerable to a sentiment reset than a fundamental one if macro retail data soften, because the shares are already pricing some of the turnaround. But over 6-12 months, the path of least resistance remains higher unless the company has to re-accelerate promotional activity to defend traffic. That would be the key tell that the market has mistaken a cyclical bounce for a structural reset.

Key Decisions for Investors

• Long TGT vs. a basket of discretionary retailers with weaker balance sheets over the next 3-6 months; the setup favors Target's operating leverage if markdowns stay contained, with downside if traffic stalls.
• Buy TGT call spreads 3-6 months out to express continued rerating while limiting premium outlay; best risk/reward if the stock grinds higher on quarterly evidence of margin repair rather than a dramatic sales surprise.
• Pair trade: long TGT / short a home-apparel exposed peer with slower inventory turns and heavier promo dependence; this isolates the self-help story from broader consumer demand noise.
• If TGT fails to show sequential gross margin improvement in the next two quarters, trim aggressively; the thesis is margin-led, so lack of evidence should compress multiple expansion quickly.
• For event-driven desks, look for an add-on entry on any post-earnings drawdown that is not tied to a guide-down; the market is likely to buy the first sign of operating leverage more aggressively than current positioning suggests.