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Dollar Tree (NASDAQ:DLTR) was downgraded to Neutral from Overweight by JPMorgan on Thursday, with analysts there also cutting the firm’s price target on the stock to $150 from $160.
The discount retailer posted earnings before the open on Wednesday, topping profit and revenue expectations, but its guidance missed analyst consensus estimates.
“Management’s initial $6.30-$6.80 FY23 EPS guide based on low to mid-single-digit comps and 130bps of EBIT margin erosion fell short of $7-$7.50 market expectations by call volume into the print with an incremental $1.45 EPS headwind tied to $430m of accelerated OpEx investments the primary delta relative to consensus $7.63,” wrote the analysts.
They added that Dollar Tree management cited multiple moving parts and noise in the last 30 to 45 days in the quarter, as well as the macroeconomic environment, as reasons for its guidance caution.
The analysts stated that Dollar Tree is transitioning to a “gross profit dollar story,” and its elevated multi-year capex investments will constrain its free cash flow profile.
