Street Calls of the Week
On Friday, BMO Capital Markets updated its outlook on Dollarama Inc . (TSX:DOL:CN) (OTC: DLMAF), raising the price target to Cdn$160.00 from the previous Cdn$154.00. The firm reaffirmed its Outperform rating on the discount retailer’s shares, indicating a positive perspective on the stock’s future performance.
The adjustment in Dollarama’s price target reflects BMO Capital’s expectation of the company delivering a quarter in line with forecasts. The firm anticipates Dollarama to announce its financial results for the fourth quarter of fiscal year 2025 soon, alongside initial guidance for fiscal year 2026. According to BMO Capital, their estimates for the upcoming quarter have not changed, suggesting that they foresee no surprises in the retailer’s financial performance.
The analyst at BMO Capital highlighted Dollarama’s business model as particularly well-suited to the current economic environment, which is characterized by rising cost inflation. The firm posits that Dollarama’s position as a price-follower and discount retailer provides it with a competitive edge in the market, potentially supporting the stock’s valuation at historical highs.
Despite the stock’s valuation reaching 21.5 times the forecasted EBITDA for fiscal year 2026, BMO Capital believes that the valuation is justifiable. The new price target of Cdn$160 is based on a multiple of 20.5 times the estimated EBITDA for fiscal year 2027, suggesting confidence in Dollarama’s continued growth trajectory and its ability to maintain profitability in the face of macroeconomic challenges.
Investors will be looking forward to Dollarama’s upcoming earnings report and guidance for fiscal year 2026, which will provide further insights into the company’s performance and strategic direction in the current economic climate.
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