On Wednesday, BofA Securities adjusted its outlook on Dollar Tree (NASDAQ: NASDAQ:DLTR), increasing the price target to $75 from $70, while keeping an Underperform rating on the stock. The adjustment follows the announcement of CFO Jeff Davis's decision to step down, which occurred today. The stock, currently trading at $74.54, has experienced a significant decline of nearly 40% over the past six months, according to InvestingPro data.
The firm cited several factors for maintaining the Underperform rating, including potential risks stemming from recent management changes. These concerns are compounded by challenges related to Dollar Tree's ongoing multi-price strategy.
The strategy involves the transition of stores to offer products at various price points, rather than the traditional single dollar price point. Despite these challenges, InvestingPro analysis suggests the stock is currently undervalued, with additional ProTips available for subscribers looking to dive deeper into the company's fundamentals.
Another concern for the discount retailer is the possibility of a competitive backlash as Dollar Tree moves into selling higher-priced consumable goods. This could potentially put the company at odds with other retailers in the space, creating additional pressure.
In terms of valuation, BofA Securities has applied an 11-12 times multiple to the forecasted fiscal year 2027 earnings per share (EPS) of $6.60. This multiple is a reduction from the previous 12 times multiple, reflecting a longer valuation horizon.
The revised price objective of $75 factors in these various considerations as Dollar Tree navigates its strategic and operational changes. Notably, analysts maintain varied price targets ranging from $64 to $120, with InvestingPro's comprehensive analysis showing the company maintains a Fair financial health score despite recent challenges.
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