Analysts Boost Dollar Tree Price Target As '$1.25 Price Point' Gains Attention

Analysts raised their price targets sharply on Dollar Tree Inc following its Q3 results.

• BMO Capital analyst Kelly Bania raised the price target to $155 from $97 (6% upside) but kept a Market Perform rating on the shares.
• The analyst said the company's strategic change to convert its price point to $1.25 "adds flexibility" to what used to be a very inflexible model.
• Bania boosted her assumed valuation for the stock to 19-times forward earnings from 15-times prior multiple and raised her FY23 EPS view to $8.20 from $6.40.
• Deutsche Bank analyst Krisztina Katai raised the firm's price target on Dollar Tree to $171 from $148 (17% upside) and kept a Buy rating, adding after 35 years of operating at a fixed $1.00, Dollar Tree is rolling out a permanent $1.25 price point across its entire network by the end of Q1.
• Katai said the higher price point will result in an improved product assortment and help offset any potential future cost pressures.
• Barclays analyst Karen Short raised the firm's price target on Dollar Tree to $140 from $100 (3.7% downside) and kept an Equal Weight rating on the shares.
• Short said while the company's results "weren't as bad as widely expected," the announced strategy to raise prices on nearly all items to $1.25 by the end of Q1 was the big focus.
• Piper Sandler analyst Peter Keith raised the firm's price target to $144 from $93 and reiterated a Neutral rating on the shares following the Q3 report.
• Telsey Advisory analyst Joseph Feldman upgraded Dollar Tree to Outperform from Market Perform with a price target of $175, up from $132 (20% upside).
• The analyst saw "higher visibility" into Dollar Tree's multi-year growth prospects given the rollout of a higher base price per item of $1.25 versus $1.00 previously across over 75% of the core Dollar Tree assortment by the end of Q1.
• JPMorgan analyst Matthew Boss raised the price target to $169 from $131 and kept an Overweight rating. The analyst says the rollout of a $1.25 price point to all legacy Dollar Tree stores by Q1 equates to a 15% sales lift in fiscal 2022.
• BofA analyst Robert Ohmes raised the price target to $108 from $90 (25% downside) after the company announced the addition of a $1.25 price point that should drive short-term sales upside.
• However, Ohmes sees several risks to the company's "dramatic" price increase strategy, including the potential for reduced traffic frequency in what he calls "an already negative traffic environment for small stores," and keeps an Underperform rating.
• Evercore ISI analyst Michael Montani increased the price target to $150 from $125 (3% upside) and maintained an In Line rating on the shares, noting that the company is breaking the $1.00 price point a year earlier than he anticipated.
• He now sees Dollar Tree as a share gainer in 2022 versus his prior outlook for share loss, but notes that Q3 results show freight headwinds are "profound," while share loss and traffic declines are ongoing.
• Price Action: DLTR shares rose 1.3% to $146.61 on Wednesday.