Why this analyst says Target’s rebounding stock is overvalued

Target (TGT) has a lot to prove on its May 20 earnings day.

And one Wall Street analyst is betting the only thing it will prove on earnings day is that the stock is overvalued.

The news: BofA analyst Christopher Nardone reiterated his Underperform rating on Target’s stock in a note on Wednesday. Shares fell 1% in afternoon trading.

Explains Nardone, “While we expect a strong 1Q print, we remain cautious due to 1) decelerating sales trends post 1Q amidst an environment where the tax refund tailwind on spending fades, 2) lapping pricing tailwinds from tariffs in the second half of the year, and 3) the war/higher gas prices linger.”

Nardone said if there’s no relief in gas prices by the time Target reports earnings, “we think the company will likely provide a balanced tone on its outlook (cautiousness on macro but optimism on merchandising advancements).”

Target, at a glance: Target’s holiday season was terrible, a culmination of its heavy exposure to discretionary items and shoppers’ perception that its merchandise was too expensive.

Not helping matters was lingering consumer angst over how Target management handled highly publicized social issues. The retailer notched a fourth straight quarter of falling customer transactions (aka traffic). Comparable sales fell 2.5%, while Walmart US saw a comparable sales gain of 4.6%.

For the full year 2025, Target’s net sales fell 1.7% to $104.8 billion, down from $106.6 billion in 2024. The decline was more pronounced in profitability, as operating income dropped 8.1% to $5.1 billion.

The stock has jumped since the company reported earnings in early March, however.

Shares have gained roughly 6% as investors eye a turnaround under new CEO Michael Fiddelke, who has moved to streamline costs. He has also sought to improve the chain’s apparel partnerships, adding names like Roller Rabbit and Parke.

There is a further view that Target’s 2026 can’t be more dreadful than 2025. In Wall Street speak, it’s called Target is going up against “easy comparisons.”

Nardone is pushing back on that narrative.

“While we are encouraged by early traction from these high heat apparel collabs, we think broader changes across other categories and investments in the store fleet will take time to play out and worry that expectations on a swift EPS recovery could prove aggressive,” Nardone said.

Bottom line: I have said it before and will say it again. Target remains a show-me stock. Show me you can execute better. Show me consumers are embracing the changes. And now show me you can do all of this with gas above $4 a gallon.