This overlooked stock, currently trading 55% below its record peak, is outperforming the market this year. Could this be the top contrarian pick to consider right now?

Target’s Surprising Comeback in 2026

After several years of strong double-digit growth, the S&P 500 has remained relatively flat so far this year. With only a few months into 2026, there’s no immediate cause for concern among investors. Still, a downturn is inevitable at some point—and it could happen this year.

In this environment, any stock posting gains is outperforming the broader market. One unexpected winner is Target (NYSE: TGT), which, despite a prolonged decline and trading 55% below its peak, has climbed 22% since the start of the year.

Is Target’s recent surge a sign of a lasting turnaround, or is it just a temporary rally?

Image source: Target.

Leadership Changes and a New Direction

Michael Fiddelke officially took over as Target’s CEO on February 1, after months of preparation following his appointment last August. Previously serving as COO, Fiddelke brings deep knowledge of the company’s operations.

Anyone familiar with Target—whether as a customer or investor—has likely noticed the company’s recent struggles. Persistent inventory issues and a product lineup that failed to connect with its core shoppers have weighed on sales. Meanwhile, rivals like Walmart and Costco Wholesale have continued to post steady growth.

Fiddelke has laid out a strategy to restore Target’s reputation as a vibrant, enjoyable shopping destination, emphasizing unique in-house brands that blend style with value. The company also plans to open additional locations and leverage technology to expand its successful next-day delivery services. In the most recent quarter, same-day delivery for members jumped 30% year over year, underscoring Target’s strength in this area.

Target isn’t aiming to be a one-stop shop for everything. Our guests expect a curated, on-trend selection they can count on for both quality and value.

Now, the challenge for management is to translate this vision into tangible growth in sales and profitability.

Performance Will Tell the Story

Although Target still faces significant hurdles, investors responded positively to its latest quarterly results. While both total sales and comparable sales dipped slightly from the previous year, adjusted earnings per share (EPS) and operating income saw modest increases. The market tends to reward companies that exceed earnings expectations, and Target’s adjusted EPS surpassed Wall Street’s forecast by $0.28.

Is Target a Contrarian Opportunity?

After a series of setbacks, many believed Target’s best days were behind it. Even with this year’s rally, the stock remains far below its previous highs. Currently, Target trades at less than 15 times trailing earnings and 19 times trailing free cash flow, making it appear undervalued.

Another advantage is Target’s status as a Dividend King, currently offering a 3.8% yield. This reliable, high-yield dividend provides some downside protection for shareholders, even if the stock’s direction remains uncertain.

If Target can successfully refine its business model and return to its strengths, it could become a compelling investment. While the outcome is still unclear, the attractive dividend may make it worth considering a small position now.

Should You Invest in Target Today?

Before adding Target to your portfolio, keep this in mind:

The Motley Fool Stock Advisor team recently revealed their picks for the 10 best stocks to buy right now—and Target didn’t make the list. The selected stocks are expected to deliver significant returns in the years ahead.

For example, when Netflix was recommended on December 17, 2004, a $1,000 investment would now be worth $514,000. Similarly, a $1,000 investment in Nvidia on April 15, 2005, would have grown to $1,105,029.

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*Stock Advisor returns as of March 14, 2026.