Dollar Tree’s Strategic Moves and Positive Long-Term Outlook Justify Buy Rating

BMO Capital analyst Kelly Bania has maintained their bullish stance on DLTR stock, giving a Buy rating yesterday.

Kelly Bania has given his Buy rating due to a combination of factors surrounding Dollar Tree’s prospects and strategic moves. He discerns a positive risk/reward situation for the stock, factoring in the potential sale of the Family Dollar segment, which is generating investor interest and could maximize shareholder value. The company has also signaled openness to various strategic alternatives, suggesting a proactive approach to unlocking value. Additionally, the analyst notes that Dollar Tree’s fully integrated multi-price conversions are expected to incur one-time costs, largely tied to third-party labor, which while impacting short-term earnings, may not affect long-term financial health.

The report maintains that despite the volatility and changes to the company’s plans, the long-term earnings per share (EPS) forecast remains robust. Bania projects a $9.50 EPS by 2026, which he believes Dollar Tree can achieve whether operating combined or as a standalone entity. His target price for the stock is set at $160, based on a 20x price-to-earnings (P/E) multiple on projected 2026 earnings, indicating confidence in the company’s earnings growth and overall financial trajectory. This analysis leads to the conclusion that the current market conditions and company strategies present a favorable opportunity for investors, justifying the Buy rating.

According to TipRanks, Bania is a 4-star analyst with an average return of 5.6% and a 64.44% success rate. Bania covers the Consumer Defensive sector, focusing on stocks such as US Foods Holding, Kroger Company, and SpartanNash Co.

In another report released yesterday, J.P. Morgan also maintained a Buy rating on the stock with a $152.00 price target.

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Dollar Tree (DLTR) Company Description:

Dollar Tree, Inc. is a discount variety retail store operator that sells items for $1 or less. The company operates over 15,000 stores in the United States and Canada under the Dollar Tree and Family Dollar brands. It offers a wide range of quality everyday general merchandise in several categories, including candy and food, housewares, seasonal goods, health and beauty care, stationery, books, personal accessories, toys, gifts, party goods, and other consumer items.