Evercore ISI lifts Five Below stock target to $93, keeps In Line rating

On Thursday, Evercore ISI analyst Michael Montani adjusted the price target for Five Below stock to $93.00, a slight increase from the previous $92.00, while maintaining an In Line rating. Currently trading at $75.59, the stock has experienced significant pressure, down nearly 64% over the past year. Montani acknowledges the retailer’s efforts to return to its core strengths of offering great value and fun shopping experiences with enticing merchandise. These efforts are seen as key to reversing a difficult first half of the fiscal year 2024.According to InvestingPro analysis, Five Below appears undervalued based on its Fair Value calculation, suggesting potential upside for investors willing to weather near-term volatility. Get access to 6 additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Five Below’s fourth-quarter results reflected these challenges, with a comparable sales decrease of 3% (which would be a 75-100 basis point increase excluding calendar shifts) and an EBIT margin rate decline of 185 basis points. Despite these headwinds, the company maintains strong fundamentals with a healthy current ratio of 1.79 and revenue growth of 8.91% in the last twelve months. Montani points out that the market is intrigued by the company’s forecast for a significant year-over-year acceleration in comparable sales for 2025, moving from a decrease of 2.7% to an increase of 1.5%. This is coupled with first-quarter sales ranging from flat to up 2%.

The analyst also discussed the potential impact of tariffs on the company’s earnings, noting that the guidance for calendar year 2025 earnings per share (EPS) is 13% below market expectations, at a midpoint of $4.40. While some investors are optimistic, viewing tariffs as a temporary setback and expecting Five Below to achieve $5.00 to $5.50 EPS for calendar year 2025, others are more cautious. They point to ongoing tariff-related headwinds, possible wage inflation, and potential reductions in the Supplemental Nutrition Assistance Program (SNAP) towards the end of 2025.Dive deeper into Five Below’s financial health with InvestingPro’s exclusive Research Report, part of our coverage of 1,400+ US stocks. Access comprehensive analysis, Fair Value estimates, and expert insights to make more informed investment decisions.

Montani’s own projections fall between these bullish and bearish perspectives. He has reduced his EPS estimate for calendar year 2025 from $4.90 to $4.70 to account for the impact of tariffs for approximately one quarter. However, his EPS forecast for calendar year 2026 remains unchanged at $5.50. The stock currently trades at a P/E ratio of 15.6x, with analyst targets ranging from $75 to $150. The analyst’s base case price target of $93.00 is based on a price-to-earnings (P/E) multiple of 17 times, reflecting the potential for Five Below to expand to over 3,000 locations in the long term. This growth potential is tempered by the need for consistent comparable sales growth of 3% or more to leverage expenses effectively.

In other recent news, Five Below Inc (NASDAQ:FIVE). reported its fourth-quarter 2024 earnings, surpassing Wall Street expectations with an earnings per share (EPS) of $3.48, compared to the forecasted $3.37. The company also exceeded revenue projections, reporting $1.39 billion against the anticipated $1.38 billion. These results reflect a 7.8% year-over-year increase in sales, showcasing the company’s effective cost management and strategic initiatives. Additionally, Five Below plans to expand by opening 150 new stores in 2025, indicating a focus on growth despite challenges such as tariff impacts. The company ended the year with $529 million in cash and no debt, positioning it well for future investments. For the full year, sales reached $3.88 billion, marking a 10.4% increase from the previous year, although adjusted EPS decreased slightly to $5.04 from $5.26. Analysts from firms like Truist Securities have noted the company’s efforts in tariff mitigation and product sourcing diversification. These developments highlight Five Below’s strategic planning and adaptability in a challenging retail environment.

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