UBS analyst Mauricio Serna maintained a Sell rating on Dillard’s today and set a price target of $460.00.
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Mauricio Serna has given his Sell rating due to a combination of factors impacting Dillard’s long-term growth potential. Despite the company’s ability to drive modest sales growth, Serna anticipates limited EPS growth due to low single-digit sales growth and stable margins. Additionally, he expects near-term margin pressures from tariff-related costs, forecasting a 2% EPS compound annual growth rate post-FY25. This outlook, combined with a mid-single-digit dividend yield, suggests a valuation of 13x P/E, significantly lower than the current 20x FY2e P/E.
Serna’s analysis indicates that Dillard’s can achieve low single-digit EPS growth and mid-single-digit total shareholder returns over time. This is attributed to low competition in key markets and a shift back to in-store shopping, although off-price retailers are expected to gain market share. While Dillard’s can maintain elevated EBIT margins due to premium pricing, tariff pressures are anticipated in FY25-26. Despite generating substantial free cash flow, Serna believes the market will eventually recognize Dillard’s limited growth potential, leading to a stock price decline towards the $460 price target, implying a 31% downside.
Serna covers the Consumer Cyclical sector, focusing on stocks such as Victoria’s Secret, Buckle, and Signet Jewelers. According to TipRanks, Serna has an average return of 2.2% and a 43.33% success rate on recommended stocks.
In another report released on November 24, J.P. Morgan also maintained a Sell rating on the stock with a $524.00 price target.