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Takeaways
- Dollar Tree shares rallied 10% Thursday as analysts cheered the retailer's plan to sell the Family Dollar brand.
- UBS Securities analysts said the deal "will make the investment case on the stock compelling."
- Dollar Tree's stock led gainers on the S&P 500 on Thursday.
Dollar Tree (DLTR) shares extended their Wednesday gains into Thursday, leading the S&P 500’s risers as analysts issued bullish comments on the retailer’s deal to sell the Family Dollar brand.
Analysts at UBS Securities on Thursday maintained their “buy’ rating with a price target of $95 and said that the Family Dollar sale would “make the investment case compelling on the stock, despite different uncertainties such as the impact on tariffs.”
Dollar Tree 'Removed Its Biggest Hurdle' to Shareholder Value
Analysts said that Dollar Tree had “finally removed the biggest hurdle” to creating shareholder value with the sale of the Family Dollar brand for $1 billion to two private equity firms. Analysts said that they believed investor sentiment would improve as Dollar Tree’s earnings increase without Family Dollar.
The analysts cited the comments of management that customers across a wide range of income levels turn to Dollar Tree to show that the company is well positioned to profit from consumers who are trading down and seeking value.
In another research note, JPMorgan analysts Thursday kept their “neutral’ rating while lowering their target price to $78 from $88, to reflect Dollar Tree operating as an independent business rather than with Family Dollar.
UBS's $95 price target is higher than the $78.29 consensus compiled by Visible Alpha, while JPM's new price target is in line with the average. Dollar Tree shares gained 10% on Thursday afternoon to $76.31.
Analysts at both brokerage firms have also pointed out the potential negative effects of tariffs announced by the Trump administration. Dollar Tree executives claim that they haven’t factored in all of the tariffs announced into their full-year forecast numbers. UBS analysts, however, said that benefits like the Family Dollar Sale and improving comparable-store sale trends “outweigh” tariff risks.
