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On Thursday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Five Below (NASDAQ:FIVE) shares, reducing the price target to $88 from the previous $105, while maintaining a Neutral rating on the stock. Analyst David Bellinger provided insights into the company’s recent performance and future expectations. Currently trading at $75.59, Five Below’s stock has been trending upward following the announcement of their fourth-quarter results, with a 4.62% gain in the past week, despite having fallen nearly 64% over the past year. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, suggesting potential upside for investors.
Bellinger noted that Five Below’s management is actively refining its product assortment within the core $1-5 price range. This strategy appears to be resonating with consumers, as demand has remained strong—a fact that stands out positively compared to other consumer sectors. The company maintains healthy profitability with a gross margin of 34.89% and has demonstrated solid financial health with a current ratio of 1.79, indicating strong liquidity. However, the company is facing challenges from tariffs, which are expected to erode margins by approximately 7 to 10 basis points. This situation forces Five Below to navigate a delicate balance between implementing price increases and maintaining its value proposition to customers.
The analyst highlighted certain key points from the company’s recent earnings call. First, comparable store sales for the first quarter to date are within a range of 0 to 2% growth, with the anticipation of larger Easter weeks yet to come. Second, the guidance for fiscal year 2025 includes the tariffs that have been announced or are known as of now and does not account for any potential reciprocal tariffs that might be introduced on April 2. Third, some tariff rates on products imported from China have surged to around 45% due to recent incremental increases on top of existing duties.
Bellinger had previously projected that Five Below’s earnings per share (EPS) for fiscal year 2025 might fall below the actual EPS for fiscal year 2024, even if comparable store sales were positive. With current diluted EPS at $4.60 and analysts forecasting $4.63 for FY2026, the stock trades at a P/E ratio of 15.6x. Get deeper insights into Five Below’s valuation metrics and growth potential with InvestingPro, which offers exclusive access to over 30 key financial metrics and professional-grade analysis tools. The revised price target reflects these considerations, as the analyst sets a more cautious valuation on the company’s shares.
In other recent news, Five Below Inc . 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 reported revenue of $1.39 billion, exceeding the anticipated $1.38 billion. These results reflect a 7.8% year-over-year increase in sales, despite a 2.7% decrease in comparable sales for the full year. Five Below ended the year with $529 million in cash and no debt, positioning it well for future growth, including plans to open 150 new stores in 2025.
Additionally, Evercore ISI analyst Michael Montani adjusted the price target for Five Below stock to $93.00, up from $92.00, while maintaining an In Line rating. Montani highlighted the company’s forecast for a significant year-over-year acceleration in comparable sales for 2025, alongside potential tariff impacts on earnings. The guidance for calendar year 2025 earnings per share (EPS) stands at $4.40, which is 13% below market expectations. Despite this, some investors remain optimistic, expecting EPS to reach between $5.00 and $5.50 for 2025.
Five Below’s strategic initiatives include significant tariff mitigation strategies and selective price adjustments to optimize its product offerings. CEO Winnie Park emphasized the importance of maintaining the company’s core price point strategy, stating, "We want to uphold our core price point of five and below." The retailer’s ongoing efforts to return to its core strengths aim to leverage expenses effectively and expand to over 3,000 locations in the long term.
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