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Investing.com -- Morgan Stanley has raised price targets on several U.S. retail stocks following stronger-than-expected second-quarter results, citing broad-based sales growth despite margin pressures from tariffs and conservatism in guidance.
The bank lifted its target for Dollar General to $125 from $115, for Dick’s Sporting Goods to $253 from $232, for Ollie’s Bargain Outlet to $145 from $118, and for Ulta Beauty to $600 from $550.
“Sales growth [was] solid across the board with a mixture of conservatism and tariff issues impacting margins,” Morgan Stanley said. The analysts added they “prefer ULTA & DKS” among the group.
On Ulta Beauty, the firm noted second-quarter same-store sales growth of 6.7 percent, well ahead of the Street’s 2.9 percent forecast. “We think valuation of ~21x NTM P/E … is undemanding for a business with renewed topline momentum and market share gains,” Morgan Stanley wrote, maintaining an Overweight rating on the stock..
For Dick’s Sporting Goods, the bank also kept an Overweight rating and said its raised $253 target implies 18 percent upside. “We believe DKS is undervalued given its growth potential and durability as a share gainer,” it said, while describing management’s second-half guidance as “conservatism and prudence given impending tariffs.”
Dollar General also saw its target raised after a recovery in comparable sales and margins, though the analysts maintained an Equal-weight stance. “DG is recapturing a respectable and solid comp and EPS algorithm,” the note said, pointing to strong margin gains in the latest quarter.
Morgan Stanley highlighted Ollie’s positive momentum from store closures and a strong closeout pipeline but warned valuation looked “fair” at current levels.