Guggenheim Initiates Dollar Tree with a ‘Buy’ Rating


Jan. 16 2018, Published 8:26 a.m. ET

Guggenheim rates Dollar Tree a ‘buy’

On Thursday, January 11, 2018, Guggenheim initiated coverage on discount retailer Dollar Tree Stores (DLTR) with a “buy” rating. Analyst John Heinbockel said, “We believe Dollar Tree is the rare business that is both a ‘growth’ story and a ‘turnaround.'” He assigned a price target of $125 on DLTR, representing a 15% upside potential.

On average, Wall Street has assigned Dollar Tree a price target of $111.65. The company, however, is trading higher at $114.84 as of January 12, 2018. The individual target prices for the company range from $78 to $135. We’ll look at Wall Street’s view of the company in the next part of this series.

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DLTR is trading at its 52-week high

DLTR touched its 52-week high of $115.05 (+3.1%) on January 12, 2018, a day after Guggenheim assigned a “buy” for the company. The news of Walmart raising wages also positively impacted DLTR’s share price.

Brokerage firm BTIG pointed out that Dollar Tree and Dollar General (DG) could benefit from the wage hike announced by Walmart (WMT) on Thursday.

Analyst Alan Rifkin wrote in a client note, “While clearly not every dollar will be spent at dollar stores, we believe this is positive for Dollar General DG, +0.93%, Dollar Tree DLTR, +3.13% and Five Below FIVE, -1.75% as the low-end consumer has a high propensity to spend incremental wage gains, with discretionary items likely to benefit more than consumables.” He added, “This is beneficial, as discretionary has higher margins.”

Walmart plans to raise its entry-level wages to $11 per hour in February 2018 and offer a one-time cash bonus of up to $1,000 as the company gains from the recent tax reforms.

Investors looking for exposure to Dollar Tree through ETFs can consider the iShares Morningstar Mid-Cap Growth (JKH), which invests 1.4% of its total holdings in the company.


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