Ollie's Bargain Outlet is the IBD Stock Of The Day Wednesday as OLLI stock tests an early entry opportunity. Ollie's is part of the discount retailers group, which is doing fairly well ahead of the holiday shopping season.
Goldman Sachs upgraded OLLI stock to buy from neutral on Oct. 17 and hoisted its price target to $83 from $75. The firm expects the favorable near-term closeout environment to offer tailwinds for the company. Meanwhile, the Ollie's Bargain Outlet strategy to scale up drives a cycle of improved supply chain opportunities and sales growth, the report said. Goldman sees Ollie's margins returning to the 40% target range, according to the research note.
Wells Fargo lifted its price target on OLLI stock to $88 from $87 on Oct. 2 and maintained an overweight rating on the shares. Wells Fargo noted Ollie's Bargain Outlet benefits from a rising number of consumers trading down to less expensive goods. That provides margin tailwinds, and Wells Fargo expects Ollie's to beat Q4 expectations and raise its forecast against the tough economic backdrop.
Meanwhile, Ollie's Bargain Outlet earnings growth accelerated the past four quarters and bolted 205% on Q2 results in August. The Harrisburg, Pa.-based discount chain reported improving sales growth the last three quarters, with revenue climbing 14% in its second-quarter.
For Q3 results, analysts polled by FactSet expect 18.9% earnings growth to 44 cents per share on 12% revenue growth to $468 million. Ollie's Bargain Outlet has not yet released its earnings date.
Discount Retailers Hold Up
Dollar stores historically tend to do well in economic downturns, partly because they target consumers accustomed to living in tight circumstances. Dollar General, for example, says its core customers tend to earn below $40,000 a year.
So, when economic conditions turn south, bargain retailers are often able to hold core customers and pick up new shoppers who are dialing down their expectations. In addition, investors commonly use discount and variety stocks as defensive plays in periods when the economy is struggling.
The eight-stock Retail-Discount & Variety industry group rose 4.7% in October, led by a 12.5% gain from Dollar General. Five Below advanced 8.1% for the month while Dollar Tree climbed 4.4%. OLLI stock ticked up a fraction for the month.
China-based Miniso is showing resilience near a buy point for a consolidation ahead of earnings slated for Nov. 17.
The Retail-Major Discount Chains group, which includes Costco, Walmart, Target and PriceSmart, eased 2.8% in October.
COST stock dipped 2.2% for the month after its flat base breakout on Costco's September earnings stalled.
Dow Jones behemoth Walmart formed a handle last week and toyed with the 164.33 buy point on Wednesday. WMT stock rose 2.2% in October.
PSMT stock fell 16% in October while TGT stock inched slightly higher.
OLLI Stock
OLLI stock is on the IBD 50 and Leaderboard lists. It is also on the latest list of new buys by the best mutual funds. Ollie's Bargain Outlet Ranks second in the Retail-Discount & Variety industry group, according to IBD Stock Checkup, trailing only Miniso.
Ollie's shares are attempting to climb for the seventh consecutive trading session. Those gains came on light volume. OLLI stock trading volume is down 33% for the week. Investors would like to see some heavy buying to sustain the advance.
OLLI stock is trading in a flat base with an 80.94 buy point. The stock tested a trendline entry on Wednesday. A move above Wednesday's high of 78.59 would be actionable.
Ollie's relative strength line is at 52-week highs, indicating outperformance compared to the S&P 500 index. Shares have a 95 RS Rating out of a best-possible 99. OLLI stock has a 95 Composite Rating. The Composite Rating combines various technical indicators into one easy-to-read score. Additionally, it has a muscular 89 EPS Rating.
OLLI stock has rallied more than 65% year to date.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
