Target & HomeDepot earnings next week. Here's why I think they are good buying opportunities

US Market & Sectors
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:dart: Target (TGT)

Earnings Date: Wed, May 22, 2025
Analyst Estimates:

  • EPS: $1.68
  • Revenue: $24.45B

Why It Could Be a Buy:

  • Turnaround Narrative Taking Shape: Target’s massive $4–5B reinvestment strategy into store remodels, last-mile fulfillment, and tech isn’t just capex—it’s strategic positioning for the next cycle.
  • Exclusive Brands Gaining Traction: Owned brands like Good & Gather and Cat & Jack are delivering higher margins and customer stickiness. If discretionary spend returns even modestly, TGT benefits outsized.
  • Deep Discount Already Priced In: Stock is down ~40% from 2021 highs. Even a mild earnings beat or strong guidance could spark a rerating.
  • Operating Leverage Comeback: As SG&A normalizes post-inflation and promotional costs ease, Target could show surprising earnings recovery by Q3–Q4.

My view: “The market may be overly pessimistic. Target isn’t broken—it’s resetting. The reward-risk looks really good here if you’ve got a 12–18 month view.”

:hammer_and_wrench: Home Depot (HD)

Earnings Date: Tue, May 21, 2025
Analyst Estimates:

  • EPS: $3.59
  • Revenue: $39.2B (+8% YoY)

Why It Could Be a Buy:

  • Pro Business is Quietly Booming: Home Depot’s contractor-focused “Pro” segment is growing faster than DIY, creating a stable, recurring revenue stream as pros continue to spend through cycles.
  • Long-Term Margin Builder: Investments in supply chain tech, same-day fulfillment, and AI-driven inventory systems are margin expanders in disguise. These costs may pressure near-term earnings but improve operational leverage over the next 12–24 months.
  • Valuation Looks Reasonable: Trading below historical averages on a forward P/E basis, especially for a business with strong brand equity and pricing power.
  • Dividends & Buybacks: HD continues to return significant capital to shareholders—a strong buffer for total return investors.

My view: “Short-term margin pressure is noise. Home Depot is one of the best-run retailers in the U.S. and benefits from aging housing stock and rising renovation demand.”