Dollar Tree (NASDAQ: DLTR) stock was adding a few dollars to its stock price as the Thursday trading session approached closing time. Although investors weren’t impressed by the quarterly earnings report the company posted the previous morning, sentiment improved thanks to price target raises — and even one recommendation upgrade — by analysts Thursday.
Dollar Tree’s share price was more than 8% higher in mid-afternoon action, contrasting very favorably with the 0.2% dip of the S&P 500 index.
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A difference of opinion
Dollar Tree published its fiscal first-quarter figures Wednesday morning. However, investors were more concerned about management’s lower-than-expected sales guidance for the year than the double-digit gain it posted in revenue, and its notable improvement in same-store sales.
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Analysts were more impressed, and on Thursday more than a few published bullish updates on their Dollar Tree takes. One that stood out was written by J.P. Morgan’s Matthew Boss, who went so far as to upgrade his recommendation on the stock to overweight (read: buy) from neutral. He also cranked his price target well higher — it’s now $111 per share, where previously it stood at $72.
According to reports, Boss feels that Dollar Tree has the potential to return to double-digit profitability growth given the numerous levers it can pull to boost the bottom line. He believes it’ll be successful devising tariff mitigation measures (should tariffs remain an issue), and it should save on costs following the recent deal it reached to divest its Family Dollar brand for just over $1 billion.
The bargain retailer is a bargain
I’d be more inclined to side with the view of those optimistic analysts than that of the bearish investors who sold out of Dollar Tree post-earnings. Economic insecurity is growing for many American consumers, a situation that benefits discount retailers that effectively attract shoppers with constricted budgets. I would certainly consider buying this stock now.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
