The retail landscape in late 2025 has been a tale of two titans: a surging Walmart and a struggling Target Corporation (NYSE: TGT). However, the narrative for Target shifted dramatically on Friday, December 26, 2025, following a high-impact report from the Financial Times revealing that TOMS Capital Investment Management has built a “significant” activist stake in the Minneapolis-based retailer. The news sent Target shares climbing over 3% in intraday trading, as investors began to bet that a new era of accountability and operational overhaul is finally at hand.
For savvy market participants, the entry of TOMS Capital—a firm known for its surgical approach to “special situations” and unlocking latent corporate value—raises a critical question: Is Target’s current stock price a trap or a historic entry point? At a closing price of approximately $99.56, the data suggest that Target is not just undervalued; it is trading at a steep “pessimism discount” that ignores its core merchandising power and massive dividend yield.
The Valuation Gap: Why TGT is a Quantitative Bargain
Target’s 2025 performance has been undeniably grim, with the stock losing nearly 27% of its value year-to-date. This decline has pushed Target’s Price-to-Earnings (P/E) ratio down to a lean 11.7x to 12.1x. To put this in perspective, Target’s 10-year historical average P/E is roughly 16.1x, and its primary rival, Walmart, currently trades at a multiple nearly double that. This valuation compression suggests that the market has priced in a “worst-case scenario” for the retailer’s turnaround efforts.
Despite the top-line revenue decline of 0.79% in 2025, Target remains a cash-flow powerhouse. The company currently offers an expected dividend yield of 4.58%, an exceptionally high figure for a blue-chip retailer. For income-focused investors, this yield provides a significant “margin of safety” while waiting for the activist-led turnaround to bear fruit. Furthermore, Target’s recently reported Q3 2025 earnings beat consensus estimates with an EPS of $1.78, proving that the company’s internal cost-cutting measures and “Roundel” advertising business are already providing a buffer against sluggish foot traffic.
The Activist Catalyst: What TOMS Capital Sees
The timing of TOMS Capital’s investment is precise. Target is currently undergoing a seismic leadership transition, with veteran Michael Fiddelke set to take the helm as CEO in February 2026. An activist stake at this juncture provides the necessary pressure to ensure the new administration prioritizes shareholder returns over ambitious but low-margin expansion projects.
Market analysts speculate that TOMS Capital will push for three key strategic shifts:
- Supply Chain Modernization: Closing the logistics gap with Walmart and Amazon, particularly in “doorstep delivery” efficiency.
- Portfolio Optimization: Re-evaluating the $1 billion remodeling plan for 2026 to ensure capital is allocated to the highest-performing categories like Beauty and Food & Beverage, which currently account for over 50% of total revenue.
- Real Estate Monetization: Leveraging Target’s premium urban and suburban footprint to unlock value through structured finance or strategic partnerships.
The 2026 Outlook: A “Strong Buy” Case
Target is currently trading near its 52-week low of $83.44, far from its high of $145.08. While the company faces headwinds from strained household budgets and potential tariff uncertainties, its “merchandising authority” remains intact. Target continues to dominate the “discretionary-premium” niche, a segment that traditionally rebounds sharply during the early stages of an economic recovery.
With a trailing EPS of $8.24 and a consensus forecast of 7.25% earnings growth in 2026, the fundamental floor for the stock is firm. If the presence of TOMS Capital leads to even a modest multiple expansion back toward 14x or 15x, the stock would be valued north of $125.00, representing an upside of over 25% from current levels.
In the world of contrarian investing, the best opportunities are found when a high-quality brand is temporarily out of favor and a sophisticated activist investor steps in to stop the bleeding. Target Corporation is currently in that “sweet spot.” For investors looking for a combination of defensive dividend yield and aggressive turnaround growth, the message from the FT report is clear: The bottom may be in, and the bull case for Target is just beginning to take shape.