UBS cuts Ross Stores stock price target to $163

On Wednesday, UBS analyst Jay Sole adjusted the price target for Ross Stores, Inc. (NASDAQ:ROST) to $163.00, a decrease from the previous target of $168.00, while retaining a Neutral rating on the stock. According to InvestingPro data, Ross Stores maintains a strong financial health score of GOOD, with an $45.4 billion market capitalization and 8.5% revenue growth over the last twelve months. Sole’s assessment indicates a cautious view of the company’s near-term growth potential in the face of economic pressures affecting its core customer base.

Ross Stores’ fourth-quarter report revealed that the company’s underlying fundamentals are largely stable, with InvestingPro analysis showing strong liquidity with a current ratio of 1.57 and moderate debt levels. Despite the significant macroeconomic challenges faced by its low-to-middle income shoppers, UBS suggests that Ross Stores is positioned to outperform its Department Store competitors over the coming years, with an anticipated earnings per share (EPS) compound annual growth rate (CAGR) of approximately 7% over a five-year period.

The analyst believes that this growth trajectory justifies a price-to-earnings (P/E) ratio of around 21 times. However, the current fiscal year’s P/E ratio stands at 22 times, and UBS does not foresee any immediate events that might significantly elevate this multiple further. This outlook is influenced by the market’s consensus, which appears to align with UBS’s perspective on Ross Stores’ valuation.

Furthermore, data from the UBS Quant Team indicates that Ross Stores is a highly popular investment, often referred to as a "crowded long." This popularity among investors is not expected to increase substantially, based on discussions with investors. The lack of a clear catalyst to drive the P/E ratio higher underpins the decision to lower the price target, as the market’s current view is already factored into Ross Stores’ stock price.

In other recent news, Ross Stores, Inc. has seen several adjustments to its stock price targets following its latest earnings report and forward guidance. BMO Capital Markets reduced its price target to $156 while maintaining an Outperform rating, noting a bottom-line beat driven by reduced expenses and a facility sale that enhanced the EBIT margin. However, management’s guidance for the upcoming quarter and fiscal year fell short of expectations, projecting a smaller increase in comparable store sales than Wall Street anticipated. Jefferies also lowered its price target to $145, maintaining a neutral stance, and cited concerns over future performance despite a strong fourth-quarter sales performance.

Meanwhile, Telsey Advisory Group adjusted its price target to $150, maintaining a Market Perform rating due to sales and margin concerns, despite recognizing the potential for Ross Stores to continue attracting value-seeking customers. Bernstein cut its target to $163, maintaining a Market Perform rating, and highlighted challenges in customer traffic impacting earnings growth potential. TD Cowen reduced its target to $169 but reiterated a Buy rating, acknowledging potential disruptions in the first quarter but maintaining a positive long-term outlook. These developments reflect varying degrees of optimism among analysts regarding Ross Stores’ ability to navigate current market challenges.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.