Dollar Tree, Inc. (NASDAQ:DLTR) shares are plummeting after today’s earnings report, with shares down 15% as of this writing. If you are a Dollar Tree shareholder, the question you must ask yourself is: did the management’s weak guidance justify a $4 billion decline in market value? After analyzing the data, Oppenheimer analyst Rupesh Parikh says “no.”
Parikh reiterates an Outperform rating on DLTR shares, with a price target of $130, which implies a potential upside of 47% from current levels. (To watch Parikh’s track record, click here)
DLTR expects FY18 EPS of $5.25-5.60, well below Street expectations of $5.91. That said, DLTR management tends to be very conservative. As an example, last year the company initially guided to $4.20-4.56 before finishing the year at >$4.85.
Parikh commented, “As we discussed in our preview yesterday, we were worried about the mis-modeling of the tax benefit and recommended investors buy any pullback post the print. In contrast to our update yesterday, guidance in the range of $5.25-5.60 fell short of our estimate of $5.89 and more bullish Street figures above $6.50. The company plans to reinvest about $100M of the estimated $250M tax benefit in the business. Underlying results suggest continued top-line momentum in the business with comps poised to stay in the positive low single digit range. However, on the negative side, the guide suggests greater than expected margin pressures. DLTR management tends to be very conservative. We will be back with more thoughts post call as we digest all the components of the new guidance and key company assumptions. With shares indicated at roughly $92 pre-market and the reset out of the way, we would take advantage of the pullback.”
How does Parikh’s bullish bet weigh in against the Street? It appears the analyst is not the only one enthusiastic on this discount stores chain’s prospects, with TipRanks analytics demonstrating DLTR as a Strong Buy. Out of 8 analysts polled in the last 3 months, 6 are bullish on Dollar Tree stock while 2 remain sidelined. With a return potential of nearly 18%, the stock’s consensus target price stands at $122.71.