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Five Below Stock Fell after Rating Downgrade by Barclays

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Stock down on rating downgrade

Five Below (FIVE) stock fell 2.6% on May 6 after Barclays downgraded its rating from an “overweight” to an “equal weight,” citing valuation concerns. However, Barclays raised the price target for Five Below stock from $128 to $140 due to continued business momentum. On April 24, Morgan Stanley also increased its price target for Five Below from $128 to $140.

Five Below stock had risen 39.1% as of May 6 on a year-to-date basis, outperforming the 17.0% rise in the S&P 500 Index. The stock was down 2.9% as of 11:37 AM EDT on May 7.

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In contrast to Barclays, JPMorgan Chase upgraded its rating on Five Below from a “neutral” to an “overweight” on April 11. JPMorgan believes that Five Below has the potential to deliver more than a 20% rise in its annual net income. JPMorgan revised its price estimate to $150 from $133. On April 5, RBC increased its price target on the stock to $134 from $131.

Five Below stock has risen 21.4% since the company announced upbeat results for the fourth quarter of fiscal 2018 (which ended on February 2) in March. Five Below’s sales increased 19.4% to $602.7 million, and its EPS rose 31.4% to $1.59 in the quarter.

Current ratings

On May 6, Five Below stock had “buy” recommendations from 16 (or 76%) of the 21 analysts covering it. Five analysts had given it “hold” recommendations, and none had given it “sells.”

On May 6, Five Below stock had an average price target of $139.50, reflecting a potential downside of ~2.0%.

Five Below offers attractive merchandise priced at $5 or below to its target demographic of tween and teen customers. Last year, the company also tested products with prices exceeding $5 and up to $10 in six of its stores. The retailer has generated same-store sales growth for 13 consecutive years. It operated 750 stores as at the end of fiscal 2018, and it expects to expand its store base to over 2,500 in the future.

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