Could Target’s Week of Discounts Come Full Circle for Investors?

Key Points

• Target is launching a revamped Circle Week with deep discounts and a push for long-term membership growth through Circle 360, aiming to boost customer loyalty and future margins.
• Despite the promotional pricing, institutional investors are bullish on Target’s long-term value, pointing to current stock levels near 55% of its 52-week high as a compelling entry point.
• Target’s operational upgrades and logistics investments position it to absorb short-term margin hits, while a high dividend yield and possible Fed rate cuts further support upside potential.

A 40% discount across most in-store products doesn’t normally scream “bullish,” especially in the retail sector.

But for Target Corp. NYSE: TGT, October will be a defining month for the stock, giving markets a real sense of whether it can reclaim higher prices before the end of 2025 and continue that momentum into 2026. The reason is simple: Circle Week is back with a revamped strategy.

As Target trades at just 55% of its 52-week high, Investors are watching closely, to see if the new strategy lands. If it does, Circle Week could be the catalyst that propels the stock back toward historical highs and positions it for long-term growth.

Circle Week Evolves: From Discounts to Long-Term Loyalty

Target is offering an initial 40% discount on store items from Oct. 5-12. Unlike previous Circle weeks, this time discounts include legacy brands like Apple and General Electric, which may not carry the full 40% discount but are still a good deal. 

This year’s Circle Week brings more than just bargains. Target is leveraging the event as a conversion funnel for its Circle 360 membership program. While prior years focused mainly on traffic and transaction volume, the new approach aligns more with long-term customer acquisition and recurring revenue.

This approach aligns with recent moves in the company's financials. Over the past three years, Target has ramped up capital expenditures, investing heavily in its logistics and tech infrastructure. Its most recent quarter shows $790 million in capex, much of it directed toward supply chain enhancements. These upgrades position Target to absorb spikes in demand while minimizing friction and cost, which is a key move if Circle Week succeeds in onboarding a wave of new, high-margin subscribers.

Institutional Confidence Signals Limited Downside

As the stock began to find its bottoming range in August, institutional investors are seeing opportunity.

Smead Capital Management felt confident enough to increase its holdings in Target stock by 20.4% to bring them into a net position of $194.6 million. This is a clear bet on Target's future, a vote of confidence that the price will recover on these tailwinds and more.

The analyst consensus price target of $109.71 implies a 22.8% upside from today’s levels. If Target can successfully scale its Circle 360 memberships, this forecast may prove conservative.

Even more compelling is the macro backdrop: a 92.5% probability of another 0.25% Fed rate cut forecasted for October 2025. This will trickle down into lower credit card and other borrowing costs, giving consumers more room to spend and get the best "bang for their buck" in this new Target subscription.

The Bull Case: Margins, Dividends, and Market Positioning

Target has significantly better leverage than its peers in the consumer staples sector. Its gross profit margin of 27.8% over the past 12 months outperforms Walmart Inc.'s NYSE: WMT 24.9%. This may not sound like a significant difference, but when considering Target's $40.5 billion market cap compared to Walmart's $811.9 billion, this slight difference means this edge in pricing power and brand loyalty is more significant than it first appears.

Even if Circle Week fails, the stock is already trading at such low levels that further drawdowns are now unlikely. An absent rally could also be mitigated by a quarterly $4.56 dividend payout, which, at today's low, represents an annualized dividend yield of 5.1%, allowing investors to be handsomely compensated for their exposure.