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On Friday, Piper Sandler adjusted its outlook on Dollar General stock (NYSE:DG), increasing the price target to $81 from $79, while maintaining a Neutral rating. Currently trading at $78.29, the stock appears undervalued according to InvestingPro Fair Value metrics. The revision followed Dollar General’s solid fourth-quarter performance and insights shared during the earnings call, which outlined a strategy aimed at achieving a 10% annual earnings per share (EPS) growth by 2026.
Piper Sandler’s analysts noted the positive aspects of Dollar General’s current trajectory, including an uptick in higher-income consumers shopping at the stores, contributing to steady sales trends. With revenue growth of 4.96% and a market capitalization of $17.2 billion, the company has maintained its position as a prominent player in the Consumer Staples sector. The company has identified several margin drivers that are expected to restore earnings before interest and taxes (EBIT) margins to the 6-7% range. Additionally, Dollar General’s plans to expand its same-day delivery partnership with DoorDash (NASDAQ:DASH) to 10,000 stores by the end of the year were highlighted as a potential growth catalyst. InvestingPro subscribers can access additional insights through exclusive ProTips and comprehensive financial analysis.
Despite these positives, the analysts expressed concerns regarding the company’s comparative growth, which remains sluggish. There is also some uncertainty about the path to the projected 10% EPS growth by 2026. Moreover, the guidance provided by Dollar General does not seem to account for the potential impact of tariffs on the spending trends of its lower-income customer base.
The increase in the price target reflects a change in the multiple assumption from 13 times to 14 times, based on a stronger EPS growth outlook. Piper Sandler’s commentary suggests a cautiously optimistic view of Dollar General’s future performance, acknowledging both the strategic initiatives that could drive growth and the challenges that may lie ahead.
In other recent news, Dollar General has reported financial results that have caught the attention of several analysts. The company exceeded Wall Street’s expectations with an adjusted earnings per share of $1.68, surpassing the consensus by $0.17, according to Raymond (NSE:RYMD) James, which maintained its Outperform rating with a $100 price target. Jefferies also noted that Dollar General’s financial performance surpassed sales expectations, leading them to raise the stock price target to $92, despite maintaining a Reduce rating. Meanwhile, Truist Securities adjusted its price target downward to $76, citing ongoing margin pressures and challenges faced by the company’s core demographic.
Bernstein SocGen Group raised its price target to $95, expressing optimism about Dollar General’s turnaround strategy and long-term earnings potential. The company’s management has forecasted a reacceleration in comparable sales growth and a 2% growth in new units from fiscal year 2025 to 2026. KeyBanc, on the other hand, maintained a Sector Weight rating, acknowledging the company’s better-than-expected performance but highlighting near-term challenges in the dollar store sector.
Dollar General’s strategic initiatives, such as reducing shrinkage and expanding the DG Media Network, are expected to contribute to future growth. The company’s management has outlined long-term targets, including operating margins of 6-7% by 2028-2029 and a return to over 10% EPS growth starting in 2026. Despite mixed financial outcomes, analysts remain focused on Dollar General’s potential for sales growth and operational improvements.
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