On Wednesday, Citi has upgraded Ollie's Bargain Outlet (NASDAQ:OLLI) from a Sell to a Buy rating, setting a new price target of $133.00. The shift in coverage is intended to better align with Citi's Broadlines/Hardlines coverage area.
The new price target reflects a valuation based on approximately 30 times the fiscal year 2026 earnings per share. According to InvestingPro data, 8 analysts have revised their earnings upward for the upcoming period, while the stock has delivered impressive returns of over 62% in the past year.
Citi's analysis suggests that Ollie's Bargain Outlet is well-positioned to thrive in a challenging retail environment. The company's "treasure hunt" shopping experience is increasingly resonating with consumers who are looking for value. This strategy appears to be working, with revenue growing 12.48% and maintaining a healthy gross margin of 40.2%.
Additionally, Ollie's agile buying strategy is expected to take advantage of disruptions in merchandise availability due to retail closures, supply chain issues, and tariffs. InvestingPro's Financial Health Score indicates GOOD overall health, with liquid assets exceeding short-term obligations by nearly 3 times.
The long-term outlook for Ollie's is positive, with recent increases in sales volume and store count indicating that the company's business model is scalable across the United States. Citi also notes that Ollie's competitive positioning is likely to strengthen as it gains more scale, drawing parallels to the success seen by off-price apparel retail peers.
Despite trading at a premium compared to its historical 3- and 5-year averages, Ollie's stock is still trading at a discount when compared to its pre-pandemic three-year average. This suggests that there is room for further multiple expansion. Citi's endorsement reflects confidence in Ollie's growth potential and its ability to adapt to the evolving retail landscape.
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