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On Friday, Bernstein SocGen Group revised its price target for Dollar General (NYSE:DG) stock, elevating it from $90.00 to $95.00, while retaining an Outperform rating. The adjustment follows Dollar General’s management expressing confidence in the company’s turnaround strategy, which includes portfolio optimization and a new long-term earnings algorithm. According to InvestingPro analysis, Dollar General appears undervalued at its current price of $78.58, trading at a modest P/E ratio of 14.65.
Zhihan Ma, the Bernstein SocGen Group analyst, highlighted that the market is likely to respond positively to Dollar General’s portfolio optimization plans. With a substantial market capitalization of $17.29 billion and annual revenue exceeding $40.6 billion, the retailer maintains a strong market presence. Despite concerns about the retailer’s aggressive store expansion in the face of stiff competition and an already vast network of over 20,000 stores, Ma believes there are still opportunities for growth. However, it was noted that the returns on new store openings have diminished. InvestingPro subscribers can access 12+ additional exclusive insights about Dollar General’s growth potential and market position.
The analyst also pointed out that Dollar General’s financial guidance for fiscal year 2025 is more optimistic than what skeptics had anticipated. While the company forecasts a reacceleration in comparable sales growth to 2-3% from fiscal year 2025 to 2026, coupled with a 2% growth in new units, which is expected to drive net sales growth of 3.5-4%, InvestingPro data shows the stock has already demonstrated resilience with a 6.27% year-to-date return despite broader market challenges.
Dollar General’s management strategy involves closing underperforming stores and decelerating the pace of new store openings, shifting the focus to enhancing the performance of existing stores. The updated long-term guidance is seen as a reflection of management’s confidence in the company’s recovery prospects.
In concluding remarks, Ma stated, "While DG remains a ’show me’ story, we continue to like the risk reward against very low expectations." This sentiment underscores a cautious yet optimistic outlook for Dollar General’s future performance in the market.
In other recent news, Dollar General Corporation has reported financial results that have captured the attention of analysts and investors alike. The company posted better-than-expected earnings per share (EPS) for the fourth quarter, with a figure of $1.68, surpassing Wall Street’s consensus by $0.17. While same-store sales grew by 1.2% year-over-year, the company’s gross margin exceeded expectations despite a year-over-year decline. However, selling, general, and administrative expenses rose, mainly due to impairment charges linked to the optimization of 51 pOpshelf stores.
Analysts have responded with mixed reactions to Dollar General’s performance and future outlook. Jefferies raised its price target for the company’s stock to $92, citing opportunities for sales growth and potential improvements in operating margins. In contrast, Truist Securities lowered its price target to $76, maintaining a Hold rating due to concerns about ongoing margin pressures and a shift in consumer spending towards essential items. CFRA also adjusted its price target downward to $84, while Raymond (NSE:RYMD) James maintained an Outperform rating with a $100 price target, reflecting optimism about the company’s long-term operational improvements.
Dollar General’s management has outlined strategic initiatives, including plans to close some stores while opening new ones, aiming for a long-term unit growth of over 2%. The company has set ambitious goals, projecting a return to 10% or higher EPS growth starting in 2026 and operating margins of 6% to 7% by 2029-2030. These developments underscore Dollar General’s efforts to stabilize its financial performance and address challenges in the retail landscape.
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