On Thursday, Piper Sandler updated its outlook on Dollar Tree (NASDAQ:DLTR), increasing the price target to $72.00 from the previous $67.00. The firm maintained its Neutral stance on the stock. Dollar Tree's third-quarter performance was highlighted as solid, with the company reporting an Enterprise comparable sales increase of 1.8%, attributed to the Family Dollar segment and higher customer traffic over the average ticket size.
The company's guidance for fiscal year 2024 has been modestly revised upward for both revenue and earnings per share (EPS), with expectations set for a sequential comparable sales slowdown in the fourth quarter. This anticipated decline is linked to the impact of a later and shorter holiday shopping season. Despite the conservative forecast, analysts note that comparable sales growth at Dollar Tree's core banner should be gaining momentum due to the ongoing rollout of multi-price products.
The strategic review of the Family Dollar (FDO) segment is ongoing, and Dollar Tree's future growth is believed to be reliant on the successful implementation of its multi-price strategy. However, there are concerns regarding the potential need for increased advertising expenditure and further investment in omnichannel capabilities. The multi-price strategy, particularly for branded consumables, may place Dollar Tree in direct competition with other retailers.
Piper Sandler's revised price target reflects a valuation multiple of 12 times the estimated EPS for 2026. The firm's Neutral rating indicates a balanced view on the stock's current valuation and future prospects in light of the strategic initiatives underway.
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