Dollar General’s Balanced Risk/Reward Scenario Justifies Hold Rating Amid Uncertain Turnaround

Analyst Edward Kelly of Wells Fargo maintained a Hold rating on Dollar General (DG – Research Report), boosting the price target to $105.00.

Edward Kelly has given his Hold rating due to a combination of factors including Dollar General’s recent positive performance in Q1, which marked its first earnings growth since 2022. Despite this, the company’s return to its former status as a quality compounder is still uncertain. The updated guidance appears conservative, allowing room for potential upside, but the overall risk/reward scenario remains balanced.
While Dollar General has shown some progress with its turnaround efforts, such as store experience improvements and supply chain enhancements, the valuation of the stock seems full. The company’s performance has been impressive year-to-date, yet the evidence of a complete turnaround is limited. Therefore, while there is potential for the stock to rise slightly, the current valuation and the need for further improvement justify the Hold rating.

Kelly covers the Consumer Defensive sector, focusing on stocks such as Walmart, Kroger Company, and Sprouts Farmers. According to TipRanks, Kelly has an average return of 9.5% and a 66.84% success rate on recommended stocks.

In another report released yesterday, CFRA also upgraded the stock to a Hold with a $118.00 price target.