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On Tuesday, Jefferies analyst Randal Konik downgraded Ollie’s Bargain Outlet Holdings Inc (NASDAQ: OLLI) stock rating from Buy to Hold and reduced the price target to $111 from the previous $125. The decision follows an analysis of the company’s third-quarter results, which revealed gross margins (GMs) at a historical peak of 41.4%, surpassing their 40% projection. According to InvestingPro data, the stock currently trades at an elevated P/E ratio of 32.2x and EV/EBITDA multiple of 22.8x, suggesting rich valuations.
The downgrade reflects concerns about Ollie’s future performance as the company focuses on expanding its number of units. The inventory growth rate increased to 14% in the third quarter, a notable rise from 6.6% in the second quarter and 5.9% in the first quarter. This growth rate is nearly double Ollie’s sales growth, which was reported at 7.8%. Despite these concerns, InvestingPro data shows the company maintains strong financial health with a current ratio of 2.91 and moderate debt levels.
Konik pointed out that Ollie’s stock is currently trading at peak valuations. As the company enters a period of cycling tougher comparisons in 2025, the analyst anticipates greater downside risk. This risk assessment has led to the reduced price target and the change in stock rating to Hold.
Jefferies’ analysis suggests caution as Ollie’s Bargain Outlet approaches a potentially challenging phase. The report emphasizes the company’s robust third-quarter gross margins but juxtaposes this against the significant inventory growth and the pressure of upcoming comparisons. The revised price target of $111 reflects Jefferies’ adjusted expectations for the stock’s performance.
In other recent news, Ollie’s Bargain Outlet has made several significant developments. Eric van der Valk has been appointed as the new President & CEO, and he also joined the expanded Board of Directors. This change is part of the company’s succession plan, which has been in progress since June 2024. The company has seen a 12.5% revenue growth over the past year.
There has been considerable analyst attention following the closure of Big Lots (NYSE:BIG) stores. Both RBC Capital Markets and JPMorgan maintained positive ratings on Ollie’s, citing potential market share gains and increased vendor relevance. Citi also upgraded Ollie’s from a Sell to a Buy rating, setting a new price target of $133.00.
Loop Capital raised the price target for Ollie’s shares to $130 while maintaining a Buy rating. This adjustment follows a recent visit by the firm’s analysts to an Ollie’s store, which left them impressed with the company’s merchandise assortment. The company’s management has reiterated a 10% annual growth rate as a baseline for new store openings, with the flexibility to potentially open up to 75 stores annually. These are the latest developments for Ollie’s Bargain Outlet.
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