Discount retailer Dollar Tree is the IBD Stock Of The Day. Dollar Tree stock is testing support at its 50-day line. A rebound could offer a buying opportunity — but only for the most aggressive investors. Meanwhile, a decisive break of the 50-day line would be a sell signal for DLTR stock.
Shares of the chain are also holding up as inflation concerns weigh on the broader stock market. Dollar Tree in March said it had completed a plan to raise prices on many items to $1.25 across its namesake U.S. stores, a move that could help it shoulder its own rising costs.
Dollar Tree Stock
Dollar Tree stock was down 2.25% to 157.89 in the stock market today. Shares are slightly just below their 50-day line, a key test of investor support. DLTR is 1.8% below the 10-week line.
A decisive rebound from the 50-day line — which would also involve breaking a short downtrend — would give aggressive investors a chance to step in. However, a sharper turn below that line, especially with the market in correction, would be a clear sell signal.
A decisive break of the 50-day line also would mean DLTR stock would almost round trip a 19% rally from a 149.47 buy point cleared in early March.
Investors could wait for the market to work its way out of its current rut. They could buy Dollar Tree stock if its price rebounded past 177.29 — the potential buy point of what could become a flat base.
Dollar Tree stock has a 90 Composite Rating. Its EPS Rating is 59.
Among other discounters, Dollar General was down 1% to 229.07, undercutting its 50-day line and a recent buy point. Walmart lost 1% to 149.73. WMT stock is also testing its 50-day line. Shares are still above a 147.39 handle buy point.
The Composite Ratings for those stocks were 89 and 85, respectively, similar to Dollar Tree's.
Target fell 2% to 219.72, sliding from its 50-day line. Shares were in a cup-with-handle base with a 254.97 buy point.
$1.25, $3, $5 Offerings
Dollar Tree and other discounters can function as defensive plays — the idea being that customers, in a shaky economy, will seek out cheaper purchases of groceries and other items and to protect their savings. But Covid stimulus, knotted-up supply chains and Russia's invasion of Ukraine have sent costs for transportation and goods higher, testing discount stores' loyalty to lower prices.
Dollar Tree, which also owns Family Dollar, announced plans to raise prices to $1.25 on most items at its Dollar Tree stores last year. The company said the decision would allow it to broaden its product offerings. Activist investor Mantle Ridge has also taken a stake in Dollar Tree. The firm hopes to recharge performance Family Dollar, the Wall Street Journal reported last year, and has tried to shake up Dollar Tree's board.
In March, when Dollar Tree reported fourth-quarter earnings, management said customers had been "very supportive of the change." The company also said it was expanding the products it sells priced at $3 and $5.
Earnings per share for that quarter beat expectations. But revenue and same-store sales came up short. Dollar Tree forecast full-year sales and per-share profit that were below expectations. Dollar Tree stock rose after the report anyway.
