Retail Giants Face Different Destinies: WMT Soars While TGT Stumbles Entering Earnings Season

The retail sector is telling two very different stories as earnings season approaches. Walmart (WMT) has captured investor enthusiasm with a remarkable +14% year-to-date gain through 2025, while Target (TGT) shares have experienced a painful 30% decline during the same period. With both companies preparing to report Q3 results this week, investors are weighing which retail powerhouse offers the more compelling investment thesis going forward.

The Numbers Tell Opposing Tales

The earnings divergence between these two retail giants is striking. Walmart will report its Q3 results on Thursday, November 20, with analysts expecting sales to climb over 4% to $177.14 billion, demonstrating robust consumer demand. More impressively, Walmart’s Q3 earnings per share are projected to grow 5% year-over-year to $0.61. The company has demonstrated consistent execution, beating earnings expectations in three of its last four quarterly reports with an average positive surprise of 2.79%.

Target’s earnings story paints a considerably different picture ahead of its Wednesday, November 19 report. Sales are forecast to have contracted 1% to $25.36 billion, while EPS is anticipated to decline 5% to $1.76. Perhaps more concerning, Target has missed the Zacks EPS Consensus in three of its last four quarters, averaging an 8.44% shortfall—a troubling pattern that suggests operational challenges persist.

Divergent Strategic Paths Explain Market Disparities

The five-year performance gap becomes comprehensible when examining each company’s strategic execution. Walmart has aggressively leveraged its retail footprint to build a diversified revenue engine. The company’s digital sales operations now generate more than $100 billion annually, powered by expansion into higher-margin segments including advertising platforms, membership programs, marketplace services, and vertical supply chain integration. This transformation has produced outstanding long-term returns, with Walmart stock climbing over 100% during the past five years.

Target’s trajectory has been considerably more challenging. The company finds itself down over 45% during this same five-year window, plagued by sales growth that lags sector expectations, compressed profit margins, and reduced financial resilience when facing consumer spending volatility. Once regarded as a Wall Street favorite within retail equities, Target has lost that distinction as operational headwinds have accumulated.

Valuation Presents an Intriguing Disconnect

An interesting paradox emerges when examining current valuations. Target stock trades at a steep discount relative to broader market multiples—specifically 20% below its ten-year median valuation of 15X forward earnings. The stock currently trades at a substantial discount to both the S&P 500’s forward earnings multiple of 25X and the Retail & Wholesale sector’s 27X multiple, suggesting the market has priced in significant pessimism.

Walmart, conversely, commands a premium valuation of 39X forward earnings—substantially elevated relative to benchmark indices. However, this valuation premium appears justified given Walmart’s consistent earnings expansion and revenue quality. When examining price-to-sales metrics, both retailers present comparable profiles, trading at less than 2X forward sales—a level generally favored by value-oriented investors.

Income-Focused Investors Deserve Consideration

Both Walmart and Target carry elite credentials as dividend aristocrats, having increased distributions for 50+ consecutive years. This heritage appeals to income-focused investors prioritizing reliable cash returns. Target currently offers a 5.07% annual dividend yield, substantially exceeding Walmart’s 0.92% payout. For investors prioritizing current income over capital appreciation, Target’s yield advantage could prove materially significant to total return outcomes.

The Earnings Report Verdict Awaits

Both companies currently hold a Zacks Rank #3 (Hold) rating, reflecting analyst ambivalence regarding near-term direction. The critical question facing investors: Will Walmart’s momentum continue through earnings, or does Target’s depressed valuation finally signal a turning point?

Walmart appears positioned as the more defensible long-term choice for investors prioritizing growth and operational expansion. Target, however, presents a more nuanced opportunity—its sharply reduced valuation paired with an attractive dividend yield could appeal to investors seeking either a contrarian play or reliable income generation, contingent upon management executing meaningful operational improvements during the quarters ahead.