Here in 2025, shares of Target (TGT -0.58%) have hit five-year lows. Sales are slumping. And on top of that, global trade uncertainties can potentially squeeze the company's profit margins. For these reasons and more, investors are eager to head for the exit.
But where will Target be in 2028? That's a question worth exploring. Whereas many top stock analysts focus only on the present quarter or year, everyday investors can make money by extending their view farther out. And looking three years out is a good place to start.
Image source: Target.
What Target is doing right now
In the first quarter of 2025, Target generated net sales of $23.8 billion, a result of a disheartening same-store-sales decline of nearly 4%. A decline is expected on a full-year basis as well.
On one hand, it makes sense to be disheartened with these top-line numbers. After all, lower sales usually hurt profits, which is the case here. For 2025, management expects earnings per share (EPS) of $10 in a best-case scenario. For perspective, Target had EPS of over $14 just a few years ago.
On the other hand, even with a sales slump, Target should generate around $100 billion in net sales in 2025. Net sales of this magnitude suggest that it's still a top-of-mind brand for consumers, and that's hugely important when considering the company's future opportunity.
Target is a brick-and-mortar chain that's building a digital business. And being in the forefront of consumers' minds helps tremendously. There are multiple components here, but the two that I want to talk about are Roundel and Target Plus.
First, Roundel is Target's nascent retail media business: the union of retail and digital advertising. The company is able to package its robust consumer data set to advertisers.
Sometimes it generates advertising revenue directly, and other times brands lower their prices to promote their products. But overall, this is already a $2 billion business for the company, and this revenue stream enjoys better profit margins.
Likewise, Target Plus also has the potential to help profit margins. The company allows third parties to sell on its e-commerce marketplace, just like its major rivals.
As a reminder, e-commerce platforms do this for a simple reason: It's more profitable. Whereas selling first-party merchandise usually is a low-margin proposition, facilitating third-party sales and taking a cut can be quite lucrative at scale.
Where will Target be in 2028?
On the surface, Target seems like a low-growth opportunity with a modest 4% profit margin -- it hardly seems attractive. But I believe the next few years will be better than what many analysts anticipate.
For starters, Roundel is expected to go from a $2 billion business to a $4 billion business by 2029. And Target Plus is expected to facilitate $5 billion gross merchandise value by 2029. Assuming it has a 15% to 20% take rate (not unheard of), this would be a $750 million to $1 billion business for Target.
In other words, considering its 2029 targets for Roundel and Target Plus, the company has a clear path to adding around $2 billion to $2.5 billion in revenue by 2028.
Some may be unimpressed by this possibility. After all, Target is a $100 billion business; adding $2 billion is only a 2% boost. That's true. But investors would do well to remember that this boost wouldn't come from low-margin merchandise. Rather, it would come from its high-margin digital businesses.
In other words, I believe that most of the gains from Roundel and Target Plus would drop directly to the bottom line. And that's a huge deal considering it only has $4.2 billion in trailing-12-month net income.
For this reason, I wouldn't be surprised to see a boost of 40% or more in profits over the next three years. And considering that stock prices tend to follow profits over the long term, I wouldn't be surprised to see a similar move for the stock, which might be just enough to outperform the S&P 500.
The kicker here for Target investors today is its dividend. Having paid and raised its dividend for more than 50 consecutive years, it's an elite dividend stock, and right now the yield is unusually attractive at more than 4%. It's an oversimplification, but if its profits keep going up, one would expect its dividend to also keep going up.
In conclusion, I believe that Target has an opportunity to be a market-beating dividend growth stock over the next three years if it executes well with its digital businesses. And that's something that a lot of other investors might be missing today.
