Valued at a market cap of $13.8 billion, Dollar Tree, Inc. (DLTR) is an operator of discount variety stores offering merchandise and other assortments. The Virginia-based company offers a wide range of products in many categories, including housewares, seasonal goods, candy and food, toys, health and beauty care, stationery, personal accessories, and other consumer items.
Shares of this discount store company have significantly lagged behind the broader market over the past 52 weeks. DLTR has declined nearly 44.4% over this time frame, while the broader S&P 500 Index ($SPX) has soared 30.4%. Moreover, shares of DLTR are down almost 55%, compared to SPX’s 23.1% gain on a YTD basis.
Zooming in further, DLTR’s underperformance looks more pronounced when compared to the Consumer Staples Select Sector SPDR Fund’s (XLP) 15.2% gain over the past 52 weeks and 11.2% return on a YTD basis.
DLTR’s underperformance over the past year can be attributed to macroeconomic headwinds, which include persistent inflationary pressure and reduced consumer spending. Several challenges, such as the closures of nearly 1000 stores in the company’s significant Family Dollar segment, have further dampened investor confidence.
Moreover, on Sep 4, shares of DLTR plunged 22.2% after its weaker-than-expected Q2 earnings release. The company’s adjusted earnings of $0.67 per share missed the consensus estimates of $1.04, and its revenue of $7.38 billion also lagged behind the estimates of $7.48 billion. DLTR’s reduced full-year earnings and revenue guidance might have further contributed to its downward price movement.
For the current fiscal year, ending in January 2025, analysts expect DLTR’s EPS to decline 9.2% year over year to $5.35. The company’s earnings surprise history is mixed. It met the consensus estimates in just one of the last four quarters while missing on three other occasions.
Among the 24 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on seven “Strong Buy,” 16 “Hold,” and one “Moderate Sell” rating. The configuration is significantly less bullish than three months ago, with 12 analysts suggesting a “Strong Buy.”
On Nov. 18, BMO Capital maintained a “Market Perform” rating on DLTR and lowered the price target to $65, which indicates a 4.6% downside from the current levels.
The mean price target of $82.12 represents a 20.5% upside from DLTR’s current price levels. The Street-high price target of $120 suggests an upside potential of 76.1%.
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