Dollar Tree gains after Goldman Sachs points to +20% upside potential
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Dollar Tree (NASDAQ:DLTR) broke higher in early trading on Tuesday after Goldman Sachs lifted its rating to Buy from Neutral. The firm pointed to sticky new customers for Dollar Tree (DLTR) and improving discretionary cash flow outlook for lower and middle income consumers in 2024.
Analyst Kate McShane and team said they see strong earnings growth potential for the discounter supported by continued market share gains from improving traffic trends with sticky new customers, an improving discretionary cash flow outlook for lower and middle income consumers in 2024, and better shopability/in-stocks after recent investments. Lower freight costs are also expected to start to become a meaningful tailwind, and the company's multi-year turnaround efforts are seen generating an EPS CAGR of +19% through FY26, which is noted to be well above most broadline/dollar store peers.
In terms of valuation, Dollar Tree (DLTR) is noted to look compelling at 15.9X near-term P/E, which is below its historical averages for the metric.
Goldman Sachs assigned a price target to Dollar Tree (DLTR) of $137 to rep more than 20% upside potential. Dollar Tree now has 15 Buy-equivalent or better ratings on Wall Street vs. 11 Hold-equivalent ratings and 2 Sell-equivalent ratings.
Shares of Dollar Tree (DLTR) broke 2.30% higher in premarket trading to $112.63 vs. the 52-week trading range of $102.77 to $170.36. Dollar Tree (DLTR) will report earnings late in the retail season, most likely during the third week of November.

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