This retailer on Josh Brown's Best Stocks list continues rising while its biggest rival falls

Target (TGT) shows clear catch-up momentum versus Walmart (WMT): over the last 12 months TGT is up 41% vs WMT up 20%, and since a March call at $120, TGT is up ~15% while WMT has largely flatlined. In its latest quarter, Target reported net sales up 6.7% to $25.4B and a first positive comp in five quarters, with comparable sales +5.6% (traffic-driven: shopper traffic +4.4%, digital +8.9%, same-day +27%). Management expanded gross margin to 29.0% from 28.2%, raised full-year sales guidance to ~4% growth (up 2pp) and EPS outlook to the high end of $7.50–$8.50, with capex running ~$5B (+$1B) and buybacks paused in Q1 but $8.3B remaining authorization.

Analysis

The market is rewarding TGT less for absolute earnings power than for proof that execution is inflecting in the right parts of the P&L: traffic, digital mix, and higher-margin platform revenue. If that mix holds, the stock can keep rerating even without heroic top-line acceleration, because incremental dollars are now landing closer to full-margin EPS than they did in the last few years. The second-order winner is the broader general-merchandise ecosystem around TGT’s marketplace and retail media; those businesses can scale faster than store sales and make the turnaround look more durable than a pure comps story.

The risk is that this is still a highly crowded “turnaround + momentum” trade, and the next leg depends on whether the back half converts investment into operating leverage rather than just more spending. Capex and remodeling should help customer experience, but they also defer free-cash-flow improvement; if traffic normalizes or promo intensity rises, the stock can quickly shift from “recovery” to “expensive recovery.” WMT is the relative loser here only if investors believe share is rotating to TGT; otherwise WMT can simply reassert its quality premium once TGT laps easy comps.

The key catalyst window is the Aug. 19 print: that is where investors will test whether the margin story is self-funding and whether buybacks resume without hurting the balance sheet. Over 1-3 months, the setup favors continuation as long as TGT holds its breakout zone; over 6-18 months, the question is whether the company can convert operational repair into sustained market-share gains, which is a much higher bar. The contrarian miss is that the move may be more about multiple expansion on improved sentiment than a durable earnings-step function, so any stumble could unwind a lot of the last four months quickly.

Key Decisions for Investors

• Long TGT on pullbacks toward the prior breakout zone, with a tactical stop on a decisive weekly close below $120; use the Aug. 19 earnings date as the first major catalyst check for whether the turnaround is self-sustaining.
• Pair trade: long TGT / short WMT for 4-8 weeks to express continued relative-momentum convergence; thesis breaks if WMT re-accelerates in grocery/consumables and regains relative strength above its recent highs.
• If already long TGT, consider monetizing part of the move into the earnings window by selling upside calls or trimming into strength; the risk/reward worsens if the stock runs far ahead of the next operating datapoint.
• Watch for confirmation of buyback restart and FCF conversion in the next report; if repurchases resume without margin deterioration, the stock can sustain a higher multiple into year-end, but if they remain paused, the market may question how much of the EPS path is real.
• Alert item: if TGT loses the $120 support level and fails to reclaim it within 1-2 weeks, treat that as a momentum failure and rotate exposure back toward lower-volatility retail proxies rather than forcing the turnaround trade.