On Thursday, RBC Capital updated its outlook on Ollie's Bargain Outlet (NASDAQ:OLLI) shares, raising the price target to $101 from the previous $86 while keeping an Outperform rating on the stock.
The firm's revised target is based on a valuation of approximately 27 times the projected fiscal year 2025 earnings per share (EPS) of $3.75, up from the earlier estimate of 25 times.
The adjustment comes after a review of the company's recent performance, which the firm described as having "not many holes to poke this quarter."
Despite concerns over the comparisons in the upcoming two quarters, the firm noted that trends to date in the second quarter appear robust enough to offset potential negative comparable sales in July, which will be measured against a strong performance the year before.
RBC Capital also suggested that Ollie's reaffirmed gross margin guidance might be on the conservative side. In light of this, the firm has adjusted its forecasts for Ollie's.
The fiscal year 2024 and 2025 comparable sales growth estimates have been updated to 1.6% and 2.0%, up from 1.1% and 2.0%, respectively. Additionally, the net sales growth projections have been increased to 8.3% and 10.6%, from the previous 7.3% and 9.9%.
Furthermore, the earnings per share estimates for Ollie's have been revised upward, from $3.24 to $3.31 for fiscal year 2024, and from $3.61 to $3.75 for fiscal year 2025.
The firm's confidence in the revised price target and financial estimates reflects a positive outlook on Ollie's Bargain Outlet's performance and market position.
However, it was noted that although the stock maintains an Outperform rating, the risk to reward proposition is less attractive at the current stock price levels.
In other recent news, Ollie's Bargain Outlet has been the subject of multiple analyst upgrades. BofA Securities raised its price target for the company to $102, maintaining a Buy rating, while JPMorgan increased its target to $89, upholding a Neutral rating.
These adjustments followed Ollie's strong first-quarter results, which saw a substantial 49% increase in adjusted earnings per share, surpassing market expectations. The company also reported an 11% rise in net sales and a 220 basis point expansion in gross margin.
In addition to these financial successes, Ollie's has announced plans to open 50 new stores throughout the fiscal year and has raised its net sales outlook to between $2.257 billion and $2.277 billion.
The company also anticipates comparable store sales growth of 1.5% to 2.3%. Furthermore, Ollie's has acquired 11 99 Cents Only Stores in Texas, enhancing its market presence.
In terms of leadership, the company has announced a transition plan, with current Chief Operating Officer Eric van der Valk set to become CEO in early 2025. These recent developments reflect a positive trajectory for Ollie's, as it continues to navigate the competitive retail landscape.
InvestingPro Insights
Following RBC Capital's optimistic outlook on Ollie's Bargain Outlet, a dive into the real-time data from InvestingPro reveals additional facets of the company's financial health and market performance. Ollie's is currently trading at a P/E ratio of 25.87, which reflects investor confidence, especially when considering the company's revenue growth of 14.52% over the last twelve months as of Q1 2025. This growth is complemented by a strong 10.83% operating income margin, indicating efficient management and profitability.
Investors are also looking at the robust price returns, with the stock delivering a 19.9% return over the last three months. Additionally, Ollie's is trading close to its 52-week high, at 98.63% of the peak, signifying a sustained positive momentum. This could be a reflection of the company's solid fundamentals, including a notable EBITDA growth of 55.36% in the same period.
Two InvestingPro Tips that may be particularly relevant for potential investors are the stock's RSI indicating it is in overbought territory and the fact that it's trading at a low P/E ratio relative to near-term earnings growth. These insights could suggest a cautious approach to investing at the current levels, despite the overall positive performance. For those considering an investment in Ollie's, there are an additional 11 InvestingPro Tips available, which provide a deeper analysis of the company's financials and market standing. To explore these tips and enhance your investment strategy, use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/OLLI.
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