Wall Street picks favorites, with investors often piling into the stocks of companies that are performing well and selling shares of companies that are underperforming. That makes logical sense, but investors often tend to go too far in each direction. That's the real issue you need to consider when evaluating Walmart (WMT 1.35%) and Target (TGT +0.89%) right now.
Too much love vs. too little love
Walmart's stock price is currently near its all-time high. This is not an insignificant fact, since it suggests investors need to carefully consider the valuation being afforded to the shares. The numbers aren't pretty.
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Walmart's price-to-sales (P/S) ratio is currently 1.3 compared to a five-year average of around 0.8. The price-to-earnings (P/E) ratio is a lofty 40 compared to a longer-term average of 33. And the price-to-book value (P/B) ratio is roughly 9.5 compared to a five-year average of 5.8. The 0.8% dividend yield is near the low end of the historical yield range. Walmart is expensive right now.
The exact opposite is true of Target, whose price has fallen 65% since 2021. That decline has pushed its P/S ratio down to 0.4x versus a five-year average of nearly 0.7x. The P/E ratio is 11 compared to a long-term average of 16. And the P/B ratio is currently 2.7 compared to a five-year average of 5.2. Target's roughly 5% dividend yield is near the highest levels in its history. Target's stock looks cheap.
NYSE: WMT
Key Data Points
There's a reason for the valuation dichotomy
Investors aren't acting without logic. Walmart is performing fairly well right now, with fiscal Q3 2026 same-store sales up 4.5% in its U.S. business. More customers and larger spending per trip were both key factors in that result. By contrast, Target's comparable quarterly results were pretty ugly, with same-store sales down 2.7%. Not only do investors like Walmart more right now, but so do consumers.
NYSE: TGT
Key Data Points
That isn't shocking, however, when you compare the business models each of these retailers is pursuing. Walmart's everyday low-price approach is resonating well during a period when consumers are increasingly concerned about affordability. Target's goal of providing a more upscale shopping experience is out of step. This isn't the first time that's happened; history suggests that consumers will return to Target's stores when they are more comfortable with the economic environment.
Target's outlook isn't going to change overnight. A business upturn could take several quarters, if not longer. That suggests Walmart will continue to appear as a better business for a while longer. However, both business fortunes and investor emotions swing along a pendulum over time.
Dividend Kings know how to survive
This is where things get a little more interesting, because both Walmart and Target are Dividend Kings. That means they have each increased their dividend annually for 50 or more years. That doesn't happen by accident, and it shows each company is a survivor.
Target, for example, revamped its leadership team as it looks to improve its business prospects. It seems likely that, in time, Target will get back on track. It isn't clear what management will do to turn the business around, but a key factor is likely to be changing the value proposition the store offers to better align with consumers' moods. A recession would likely prolong the pain, as well. However, value investors, turnaround investors, and dividend investors will likely all find Target appealing right now.
Buying Walmart, on the other hand, requires that you believe its strong performance will continue in perpetuity, given its lofty valuation. That seems like an unlikely outcome. When consumers are more upbeat about economic growth, they will likely trade back up to more premium shopping experiences.
