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Dollar Tree stock cut, keeps overweight

EditorAhmed Abdulazez Abdulkadir
Published 06/06/2024, 09:16 PM
DLTR
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On Thursday, Piper Sandler adjusted its outlook on Dollar Tree (NASDAQ:DLTR) shares, reducing the price target to $143.00 from the previous $168.00, while maintaining an Overweight rating on the stock. The new price target follows Dollar Tree's first-quarter earnings, which aligned with estimates, but revealed concerns over slowing comparable store sales growth.

The company's comparable sales growth experienced a decline, attributed to a combination of an early Easter and adverse weather conditions, which particularly affected the core Dollar Tree stores. Despite these challenges, Piper Sandler noted that Dollar Tree has potential sales and margin drivers in the second half of the year that could help the company reach its revised earnings per share guidance, though likely at the lower end of its projected range.

In addition to the financial results, Dollar Tree announced a strategic review of its Family Dollar operations earlier than analysts had anticipated. This move is part of the company's efforts to bolster its performance and address the weaker aspects of its business.

Piper Sandler's revised price target is based on a lowered earnings multiple, moving from 20 times to 18 times earnings, due to the reduced projections for earnings per share growth. Despite the adjustment, the firm's Overweight rating suggests confidence in Dollar Tree's potential for operational improvements across its store banners in the longer term.

In other recent news, Dollar Tree has been the subject of several adjustments by financial firms due to its recent performance and strategic decisions. Following weaker-than-expected results, Truist Securities revised its price target for Dollar Tree shares, lowering it to $140 from $147, while maintaining a Buy rating. Citi downgraded the stock from a Buy to a Neutral rating, reducing the price target to $120 from $163. Both Evercore ISI and JPMorgan also adjusted their price targets, citing operational and near-term earnings challenges respectively.

Dollar Tree reported a consolidated net sales increase of 4.2% to $7.6 billion in its first quarter, with comparable store sales rising by 1.7% for Dollar Tree and Family Dollar's increasing by 0.1%. The company's full-year adjusted earnings per share (EPS) is projected to be in the range of $6.50 to $7, according to the recent earnings call.

InvestingPro Insights

As investors digest Piper Sandler's revised outlook on Dollar Tree (NASDAQ:DLTR), it's crucial to consider additional insights that could influence the investment thesis. According to InvestingPro metrics, Dollar Tree's market capitalization stands at a robust $24.59 billion, and despite recent price volatility, analysts predict the company will be profitable this year. The resilience of Dollar Tree is also evident in its ability to cover interest payments with cash flows and maintain liquid assets that exceed short-term obligations.

Moreover, the InvestingPro data reveals a P/E ratio adjusted for the last twelve months as of Q1 2025 at 22.53, with a notably low PEG ratio of 0.15, suggesting potential for growth at a reasonable price. These metrics are complemented by a solid revenue growth of 7.51% over the last twelve months, indicating underlying business strength. Additionally, the company's gross profit margin stands at a healthy 30.85%, reflecting efficient operations.

For those seeking further analysis, InvestingPro offers additional tips on Dollar Tree, including insights into the company's profitability and stock price trends. Investors can access these exclusive tips and more with an additional 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24. With six more InvestingPro Tips available, investors can gain a comprehensive understanding of Dollar Tree's financial health and future prospects.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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