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Believing that Wall Street is underestimating Five Below’s (NASDAQ:FIVE) near-term earnings power after recent merchandizing and pricing changes, Loop Capital’s Anthony Chukumba upgraded the stock to Buy from Hold and hiked his target price to $165, up 27% from the prior price target and 25% further upside from Monday’s closing price.
Additionally, Chukumba views the company’s efforts to minimize shrink and introduction of higher-priced “Five Beyond” items as an additional tailwind in the second half of 2025.
Fiscal first quarter results underscored the company’s turnaround efforts as revenue was up nearly 20% — outperforming peers in the same category – on a 7% increase in comparable sales and 6% increase in transactions. Better inventory management helped the company realize a 140-basis point gain in its gross profit margin, while earnings shot up 43% to an above-consensus $0.86.
And the company expects this momentum to continue with a FY25 revenue target of $4.33B to $4.42B and long-term EPS growth towards $6 by FY28.
“We’re looking at the early innings of a real turnaround,” agrees Seeking Alpha author Mitko Atanasov, as the company has now done a “well-coordinated strategic reset that’s starting to drive higher traffic, better productivity, and stronger top-line growth.”
With a year-over-year gain of 103%, the stock looks overvalued to peers like Dollar General (DG), Walmart (WMT), and Dollar Tree (DLTR), and at more than 28x forward earnings, the stock seems overpriced.
But Atanasov believes the company’s growth trajectory justifies the premium.
“If Five Below continues to comp in the high single digits, leans into its Uber partnership, and restores margins over the next 6-12 months, I think there’s room for the multiple to hold steady, which could unlock further upside.”
Five Below (NASDAQ:FIVE) shares were up as much as 5% on Tuesday.