On Thursday, Guggenheim maintained a Buy rating on Five Below (NASDAQ:FIVE) and raised the price target to $140 from $125, well above the current trading price of $104.97. According to InvestingPro data, five analysts have recently revised their earnings estimates upward, with price targets ranging from $83 to $150.
The firm's analyst cited the retailer's strong third-quarter performance and the early appointment of a new CEO as key factors supporting the positive outlook. The analyst highlighted that the company’s recent quarter results and guidance for the fourth quarter were impressive, outperforming expectations with positive comparable store sales that hold significant psychological importance.
The analyst also acknowledged the potential challenges due to an adverse calendar shift that could impact the fourth quarter's top and bottom lines. Despite these concerns, the firm believes that long-term investors should feel reassured that no further negative surprises are expected.
InvestingPro analysis shows the company maintains strong fundamentals with a healthy current ratio of 1.63 and impressive revenue growth of 14.23% over the last twelve months. The positive sentiment is further reinforced by the firm's increased earnings before interest and taxes (EBIT) and earnings per share (EPS) estimates for 2025, which remain above consensus.
The new price target of $140 is based on an 11.1 times multiple of the estimated 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA), as detailed in Exhibit 1 of the firm's report. The analyst reiterated the Buy rating, suggesting that if the company can maintain its growth algorithm, the stock could potentially reach a 15 times multiple, which would value shares at $180.
Guggenheim's analysis indicates confidence in Five Below's business model and its ability to navigate through near-term headwinds. The firm's perspective is that the early hiring of a talented CEO strengthens the narrative that the company's business model remains robust and that the stock is poised for further growth.
With a market capitalization of $5.77 billion and trading at a P/E ratio of 20.49x, InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report covering this retailer.
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