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Investing.com - Barclays (LON:BARC) upgraded Dollar Tree (NASDAQ:DLTR) from Equalweight to Overweight on Monday, while raising its price target to $150.00 from $115.00, citing a "cleaner growth story" following the Family Dollar sale. The stock, currently trading at $110.12 with a market capitalization of $23 billion, has shown remarkable strength with a 47% gain year-to-date, according to InvestingPro data.
The upgrade comes as Barclays observes strong momentum in Dollar Tree’s first quarter that accelerated into the second quarter, positioning the company well through the remainder of fiscal years 2025 and 2026. The firm noted both external drivers like consumer "trade in" behavior and benefits from competitor closings are supporting Dollar Tree’s performance. This momentum is reflected in the stock’s impressive 49.3% surge over the past six months, with InvestingPro data showing the stock trading near its 52-week high of $111.03.
Barclays highlighted Dollar Tree’s internal initiatives, particularly its multi-price point strategy, which appears to be resonating with customers while effectively raising prices on base assortment with minimal volume impact. These factors point to at least steady mid-single-digit comparable sales with potential upside into the high-single-digit range.
The research firm raised its fiscal year 2025 earnings per share estimate to $5.58 from $5.48, above the consensus of $5.41, and increased its fiscal year 2026 forecast to $6.59 from $6.30, compared to consensus of $6.29. Barclays noted that Dollar Tree’s adjusted EPS base should exceed $6 this year excluding transitory costs, versus company guidance of $5.15-5.65.
Barclays’ new price target of $150 represents an 18x multiple on fiscal year 2026 earnings, raised from the previous 15x multiple to reflect improved sales and margin trajectory. The firm sees potential upside to $150 based on 20x its upside case EPS of $7.48, with downside risk to $80. According to InvestingPro’s Fair Value analysis, Dollar Tree is currently trading near its Fair Value, with the stock carrying a P/E ratio of 21.8x. Investors can access 8 additional exclusive ProTips and a comprehensive analysis through InvestingPro’s detailed research report.
In other recent news, Dollar Tree has completed the sale of its Family Dollar business to private investment firms Brigade Capital and Macellum Capital for approximately $1 billion. This transaction is expected to yield around $800 million in net proceeds and generate a cash tax shield of approximately $375 million. The sale allows Dollar Tree to focus on its core operations and is anticipated to boost its second-half 2025 income by $85-$90 million. Additionally, the company has replenished its share repurchase program to $2.5 billion, aiming to return excess cash to shareholders. UBS raised its price target for Dollar Tree to $127, maintaining a Buy rating, and highlighted the positive impact of the company’s multi-price strategy. Truist Securities also maintained a Buy rating, emphasizing the benefits of the Family Dollar sale in enhancing Dollar Tree’s balance sheet. Meanwhile, Bernstein SocGen increased its price target for Dollar Tree to $86, noting strong comparable sales but cautioning about potential earnings volatility due to tariffs. Dollar Tree’s first-quarter results showed a 5.4% increase in comparable sales, exceeding expectations, and the company raised its adjusted earnings per share guidance for fiscal year 2025.
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