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On Thursday, Truist Securities adjusted its outlook on Five Below (NASDAQ:FIVE), reducing the stock’s price target to $86.00 from the previous $93.00, while sustaining a Hold rating on the shares. The decision comes after Five Below’s fourth-quarter results slightly surpassed expectations, though concerns about tariffs and cost of goods sold (COGS) pressures remain. According to InvestingPro data, the stock appears undervalued at its current price of $80.01, despite falling over 63% in the past year. The company maintains strong fundamentals with a healthy current ratio of 1.79, indicating solid liquidity.
Scot Ciccarelli, the Truist Securities analyst, noted that Five Below’s fourth-quarter performance was modestly above projections, and first-quarter comparable sales are showing slight improvements despite challenging market conditions. The company achieved revenue growth of 8.91% in the last twelve months, with total revenue reaching $3.88 billion. Ciccarelli also pointed out that the company has attempted to measure the impact of tariffs, estimating a cost of approximately $0.60 per share after taxes, or around 100 basis points.
According to the analyst’s observations, near-term trends for Five Below could accelerate as the company faces easier comparisons in the spring and early summer. However, he warns that earnings are expected to decline by more than 10% year-over-year due to the effects of tariffs and deleveraging. The analyst further explained that while the near-term might show strength for the discount retailer, there could be a significant drop-off later in the year as the second half’s focus shifts to the impact of tariffs. InvestingPro subscribers can access detailed financial health scores and 6 additional exclusive ProTips that provide deeper insights into Five Below’s performance and outlook.
The report from Truist Securities highlights the company’s efforts to adjust its merchandise mix to offer more value and lower price points in response to the tariff pressures. Despite these strategic moves, the analyst expresses caution about the potential for a ’hard fade’ in the stock’s performance as the year progresses and the tariff situation becomes more of a focal point.
Five Below, known for selling products priced at $5 or less, is facing a common challenge among retailers with the ongoing tariff situation. The company’s strategy to mitigate these impacts will be closely watched by investors as they assess the potential for near-term gains against the backdrop of anticipated cost pressures. Truist Securities’ revised price target reflects these considerations, as the firm maintains its Hold rating on Five Below stock.
In other recent news, Five Below 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. Mizuho (NYSE:MFG) Securities adjusted its outlook on Five Below shares, reducing the price target to $88 from $105, while maintaining a Neutral rating, citing challenges from tariffs affecting margins. Evercore ISI raised its price target for Five Below to $93, acknowledging the company’s efforts to return to its core strengths and improve comparable sales. KeyBanc maintained its Sector Weight rating for Five Below, highlighting the company’s proactive measures to incorporate tariffs into its guidance, which helps to mitigate fiscal risks. Despite these challenges, Five Below has announced plans to open 150 new stores in 2025, alongside new marketing strategies and product line expansions. These developments reflect Five Below’s ongoing efforts to navigate external economic factors while focusing on value and growth strategies.
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