David Jagielski, The Motley Fool

Tue, Jun 24, 2025, 1:14 PM4 min read

• Target has struggled to grow its sales in recent years.

• Concerns about the economy are weighing on discretionary spending, and that is hurting its business.

• The stock is trading at less than 11 times its trailing earnings, which is far lower than normal.

• 10 stocks we like better than Target ›

Big-box retailer Target (NYSE: TGT) has been one of the S&P 500's worst-performing stocks this year. Poor growth numbers and concerns about the overall economy have been weighing on its valuation of late. The stock is trading at levels it hasn't been at in multiple years.

While Target's stock does look cheap, investors may be worried that it's not necessarily a bargain but instead a value trap and that the stock may be destined to fall even lower. Is that the case with Target, or could the market be overreacting to its recent struggles? Is it a stock worth adding to your portfolio today?

The big problem with Target is that its business has been sluggish, and that's been going on for a while. The company experienced a boom amid the pandemic, but it has been difficult for it to simply generate positive growth in recent quarters.

Target relies heavily on discretionary spending, which makes it vulnerable to slowing economic conditions. And what's most concerning is that the worst may still be to come -- a full-blown recession.

For now, the economy is still doing relatively well, but if there's more of a slowdown and consumers further tighten up spending, then Target's top line may go on a much deeper nosedive in future quarters. The company is looking at raising prices due to tariffs, which may only exacerbate its current situation.

This year, shares of Target have declined by around 30% (as of June 20). It's been a brutal start that has pulled the stock down to levels it hasn't been at since early 2020. And the decline is also evident through the stock's price-to-earnings (P/E) multiple, which is well below its five-year average.

This steep discount highlights just how worried investors appear to be about the business. If the P/E is very low, that signifies that investors aren't confident about its future growth and are likely pricing in more challenging times ahead.

On the flip side, however, such a low valuation gives investors a bit of a margin of safety and buffer. If the company doesn't perform well, by investing in it at a discount, you may not be all that vulnerable to a steep drop in price. In the best-case scenario, where the business performs better than expected, the stock could be in a prime position to take off.