On Thursday, Piper Sandler adjusted its outlook on Dollar Tree (NASDAQ:DLTR) shares, reducing the price target from $171.00 to $168.00, while retaining an Overweight rating on the stock. The firm noted that the adjustment followed a somewhat disappointing earnings per share (EPS) print.
Despite satisfactory fourth-quarter results, excluding a one-time charge, and expected comparable store sales, the first-quarter and full-year 2024 guidance did not meet expectations.
The company's ongoing notable investments and an increase in depreciation and amortization were cited as contributing factors to the lower guidance. Additionally, Dollar Tree's decision to move away from its 2026 target of reaching $10 of EPS was highlighted as particularly disheartening.
This revision was attributed to unexpected challenges, including increased losses from shrinkage and an unfavorable product mix, as well as a reduction in Supplemental Nutrition Assistance Program (SNAP) benefits.
Piper Sandler expressed that even without meeting the $10 EPS goal in the next three years, Dollar Tree still presents an attractive growth narrative. The firm anticipates that the company will increase its earnings at a high-teens rate, possibly exceeding 20%. It was acknowledged that while the company's reported results have shown volatility, Dollar Tree's stock has historically tended to recover following post-earnings sell-offs.
The analysis concluded with an observation that despite the volatility in reported earnings over the past year, Dollar Tree's shares have a pattern of bouncing back after initial declines following earnings announcements.
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