Simeon Gutman, an analyst from Morgan Stanley, maintained the Hold rating on Dollar Tree (DLTR – Research Report). The associated price target is $80.00.
Simeon Gutman has given his Hold rating due to a combination of factors impacting Dollar Tree’s financial outlook. While the disposal of Family Dollar has removed a significant overhang, the path to EBIT margin recovery remains uncertain. The Multi-Price strategy shows promise with improved comparable sales, but these gains are partially offset by increased labor investments and maintenance costs, limiting margin expansion in the medium term.
Furthermore, despite a positive 4Q24 comp performance, gross margins fell short of expectations, affecting EBIT results. Looking ahead, the guidance for accelerated comparable sales growth is encouraging, yet concerns about declining EBIT margins due to wage inflation and store investments persist. The current valuation reflects a cautious stance on the company’s earnings potential, suggesting that while the Multi-Price strategy is beneficial, it may continue to weigh on margin recovery.
In another report released yesterday, Telsey Advisory also maintained a Hold rating on the stock with a $75.00 price target.