:max_bytes(150000):strip_icc()/GettyImages-2071871542-1075bb34f5e24fedb1b70057e5e5e42a.jpg "Here’s Why Deutsche Bank Analysts Think These Retail Stocks Can Find ‘Support’")
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Key Takeaways
- Concerns about the economy and their recently issued financial outlooks have weighed on shares of Dollar General and Dollar Tree lately.
- Analysts at Deutsche Bank on Wednesday cut their price targets on both companies’ shares.
- But the analysts, whose new targets are near Wall Street’s consensus, believe the stocks can find “support” at recent lower prices.
Shares of discount retailers Dollar General (DG) and Dollar Tree (DLTR) moved in opposite directions Thursday as investors continued to digest the companies’ latest earnings results and financial outlooks, which lately have weighed on both stocks.
One Wall Street take: Both companies’ shares should find “support” at recent prices.
Price Targets for Dollar General, Dollar Tree Lowered
Deutsche Bank analysts on Wednesday cut their price targets on both Dollar General (to $100 from $150) and Dollar Tree (to $91 from $129). Both targets are substantially above Wednesday’s closing prices—though near the Visible Alpha analyst estimate medians of about $102 and $89, respectively.
“There are likely several explanations for the challenges, which include greater competition with [Walmart] … lack of e-commerce presence, and heightened pressure on the low- to middle-income consumer,” the analysts wrote. “We recognize that with each passing quarter, it takes a greater leap of faith to believe performance will improve. Yet, there are still foundational elements that would support upside.”
What they cited: A history of delivering consistent same-store sales, “steady” margins, convenient locations, a low-price strategy, and store counts that should help them competitive against smaller rivals, even as they may feel pressed by bigger ones like Walmart.
Dollar General’s shares recently were down about 1%, while Dollar Tree’s—which plummeted Wednesday—recovered some ground with a 6% gain in early afternoon trading Thursday.