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On Thursday, CFRA analysts downgraded Dollar General stock from Hold to Sell, adjusting the price target to $75 from the previous $83. The downgrade reflects concerns over Dollar General’s vulnerability in a weakening economic environment, particularly affecting its core customer base of low- and fixed-income households. CFRA anticipates Dollar General’s same-store sales to lag behind those of its competitors this year. According to InvestingPro data, 18 analysts have recently revised their earnings estimates downward, though the stock has shown resilience with a 19.55% gain year-to-date.
The new price target is based on a 14 times multiple of CFRA’s revised fiscal year January 2026 earnings per share estimate of $5.34, which is a decrease from the earlier estimate of $5.50. Additionally, the fiscal year January 2027 EPS forecast has been reduced to $5.99 from $6.38. This adjustment is made in light of the retailer’s historical long-term average multiple of 19 times, while the stock currently trades at a P/E ratio of 18.15x. Based on InvestingPro’s Fair Value analysis, Dollar General appears fairly valued at its current price of $93.06.
CFRA analysts believe that Dollar General will face challenges in maintaining market share, particularly against Walmart (NYSE:WMT), which is expected to continue gaining ground due to its effective flywheel strategy that allows for greater reinvestment in its business. To remain competitive, Dollar General might have to reduce margins to fund investments in pricing, wages, and store maintenance.
Further risks to Dollar General’s financial outlook include potential cost pressures from tariffs and the possibility of cuts to government entitlement programs such as the Supplemental Nutrition Assistance Program (SNAP). While Dollar General may be less exposed to tariff impacts compared to Dollar Tree (NASDAQ:DLTR), due to its larger assortment of consumables that make up 82% of sales, there is still a need for strategic reinvestment in pricing to compete with supercenters and club stores.
In other recent news, Dollar General Corporation (NYSE:DG) has been the focus of several analyst updates and credit rating changes. Melius Research upgraded Dollar General’s stock rating from Hold to Buy, setting a new price target of $110, reflecting a positive outlook on the company’s current valuation. Meanwhile, Moody’s Ratings downgraded the company’s senior unsecured notes to Baa3 from Baa2, citing decreased interest coverage and weakened operating margins. Piper Sandler raised its price target for Dollar General to $81, maintaining a Neutral rating, and highlighted the company’s strategy for a 10% annual earnings per share growth by 2026.
Bernstein SocGen Group increased its price target to $95, retaining an Outperform rating, and noted Dollar General’s confidence in its turnaround strategy. KeyBanc maintained a Sector Weight rating, acknowledging that Dollar General’s recent financial performance slightly exceeded expectations despite market challenges. The company has paused share repurchases to focus on debt reduction, with plans to enhance operational efficiency and diversify its product mix. Dollar General’s management has outlined a long-term financial framework anticipating a rebound in operating margins and significant EPS growth starting in 2026. These developments indicate a cautiously optimistic outlook from analysts, despite ongoing challenges in the retail sector.
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