On Monday, JPMorgan (NYSE:JPM) changed its rating for Ollie's Bargain Outlet (NASDAQ:OLLI) stock, shifting from Neutral to Overweight and increasing the price target to $105 from the previous $89. This adjustment reflects the firm's confidence in the company's financial prospects and market performance.
The upgrade is based on a valuation pegged at approximately 25 times the price-to-earnings (P/E) ratio on the projected 2026 earnings per share (EPS) of $4.21, which is higher than the consensus estimate of $4.04. The new price target is aligned with the growth peer set's current price/earnings to growth (PEG) ratio of 1.9x.
JPMorgan's assessment points to Ollie's current quarter-to-date (QTD) performance, which is trending above its own guidance of 1.5% increase. The firm anticipates a more robust growth rate of 2%, which outpaces the general consensus of 1.6%. This suggests that Ollie's is on track to outperform the previous year's second-quarter growth of 7.9%.
Looking ahead, JPMorgan forecasts that Ollie's will experience an acceleration in organic unit growth, potentially reaching double digits in fiscal year 2025 and beyond.
This growth trajectory could lead to a store count of 1,300, signifying full market saturation over the next decade. The anticipated result is a compound annual growth rate of approximately 13% in EPS, supported by modest single-digit same-store sales growth.
Additionally, the firm sees potential for further revenue increase through lateral consolidation, which could provide additional gains in same-store sales and unit growth.
These possibilities are not currently factored into their model, indicating room for further upward adjustments in the future. JPMorgan notes that there is no structural barrier to achieving the pre-pandemic unit growth rates of 13-14% over a multi-year span.
In other recent news, Ollie's Bargain Outlet has been the subject of several positive adjustments by major financial firms. Loop Capital raised their price target for Ollie's to $100, pointing to the company's strong first quarter performance and successful cost management. The company reported a 49% increase in adjusted earnings per share and an 11% rise in net sales, exceeding expectations and prompting a raised full-year guidance.
Truist Securities and RBC (TSX:RY) Capital also increased their price targets to $102 and $101 respectively, citing Ollie's consistent performance and robust consumer appeal. In addition, BofA Securities adjusted its price target for Ollie's to $102, following the company's strong sales and improved gross margin. JPMorgan increased its price target to $89, maintaining a neutral rating.
These recent developments include Ollie's plans to open 50 new stores throughout the fiscal year and a raised outlook for total net sales projected between $2.257 billion and $2.277 billion.
The company also expects comparable store sales growth to be between 1.5% and 2.3%. In addition, Ollie's has acquired 11 99 Cents Only Stores in Texas, enhancing its market presence. These moves have been seen as positive steps for the company's future growth by various analyst firms.
InvestingPro Insights
Following JPMorgan's optimistic outlook on Ollie's Bargain Outlet, current metrics from InvestingPro reinforce the positive sentiment. With a market capitalization of approximately $5.37 billion and a P/E ratio standing at 27.53, Ollie's is demonstrating financial robustness. The adjusted P/E ratio over the last twelve months as of Q1 2025 is closely aligned at 27.28, suggesting a consistent valuation over time. Moreover, the company's PEG ratio during the same period is notably low at 0.43, indicating potential for growth when compared to its earnings trajectory.
InvestingPro Tips highlight that Ollie's has a perfect Piotroski Score of 9, which is a strong indicator of the company's financial stability. Additionally, the company has been trading near its 52-week high, with a price at 96.3% of this peak level, reflecting investor confidence and a sustained positive market performance. For readers seeking to delve deeper into the financial health and future prospects of Ollie's, additional InvestingPro Tips are available, with more than 10 further insights to explore on the platform. Utilize coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to comprehensive analysis that could inform your investment decisions.
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