QS Research · Michael Burry's Scion Capital analyst template · 2006
TARGET CORP (TGT)
As of 2026-11-09 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case none · downside -10% · upside +22%
TGT is not priced as a broken retailer: at $158.41 it trades at 8.8x TTM EV/EBITDA and 16.4x P/E, essentially matching Dollar General's 9.2x/17.3x [S1,N28,N31], while generating $4.46B TTM FCF (6.2% yield) and carrying net debt of only about 1.0x TTM EBITDA [N18,N32,N24,N14]. The market is missing a recovery in operating momentum—Q2 2026 comps +3.8% and the 2026-08-19 guidance raise to ~5% sales growth and $9.90-$10.90 EPS [S5,S31]—but it is also right that $1.65 of that EPS is a Q2 2026 tariff refund and that ex-refund operating margin guides only ~50bp above FY2025's adjusted 4.6% [S31,S102]. At today's 8.8x on $9.20B TTM EBITDA the equity is worth about $158/share (0%); 8.0x gives $142.22 (-10.2%) and 10.5x, using the dated guidance raise as the re-rate catalyst [S5], gives $192.85 (+21.7%). The base case is therefore not +30%, so this is a watch, not a long.
Key numbers
- Share price: $158.41
- Market cap: $71.97B
- Latest financial period: TTM to Aug 1, 2026
- Revenue (TTM): $107.70B
- EV / EBITDA (TTM): 8.8x
- P/E (TTM): 16.4x
- Price / book: 4.03x
The 15 boxes
- ✓ 1. Long-form business notes
Target runs one segment and makes most of its money selling merchandise, with stores fulfilling more than 97% of Merchandise Sales in each of the last three years and Roundel advertising, credit card profit-sharing, Target Plus and membership fees adding other revenue. The 2025 10-K shows Net Sales of $104.8B, down from $107.4B in 2023, while the six-year XBRL table shows revenue peaked at $109.12B in the fiscal year ended 2023-01-28 and operating income fell from $8.95B that year to $5.12B in the fiscal year ended 2026-01-31. Between the oldest and newest 10-K, the owned/exclusive brand share moved from about one-third of 2020 sales to about 30% of Merchandise Sales, loyalty shifted toward Target Circle 360, and the Ulta shop-in-shop was set to end in August 2026.
- ✓ 2. Competitive advantage
Target's stated advantage is differentiating the guest experience, backed by registered trademarks and owned/exclusive brands that are about 30% of merchandise sales and generally carry higher margins than national brands - not a cost, licence or network moat. The record shows no widening of that advantage: revenue was $106.00B in the year ended 2022-01-29 and $104.78B in the year ended 2026-01-31, while operating income fell from $8.95B to $5.12B and operating cash flow from $10.53B to $6.56B over the same six years. Competition is broad (omnichannel, off-price, wholesale clubs, category, drug, grocery, direct-to-consumer brands, online marketplaces) and the company itself flags comparison shopping on price or convenience and the absence of long-term advertiser commitments at Roundel.
- ✓ 3. 10-Q takeaways
Q2 2026 (quarter ended August 1, 2026) net sales rose 5.3% to $26.5 billion with comparable sales +3.8% on traffic +3.6%, and operating income doubled to $2.6 billion, but $994 million of that was IEEPA tariff refunds booked as a reduction of cost of sales, contributing $1.65 of the $4.11 GAAP and Adjusted EPS. Stripping the refunds out, operating income grew about 19%, gross margin expanded roughly 100bp and EPS rose 20%, while SG&A rate rose 20bp to 21.6% on payroll and incentive costs. Inventory is up to $13.2 billion to support sales, no shares were repurchased in the six months, and full-year 2026 guidance was raised to net sales growth around 5% and EPS of $9.90 to $10.90 including the refunds.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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