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Paul Trussell of Deutsche Bank on Tuesday downgraded shares of
Dollar Tree, Inc.DLTR to Hold from Buy with a price target raised to $74 from a previous $69.
“Dollar Tree is a uniquely positioned retailer producing best-in-class results across retail this year,” Trussell wrote in a note. “However, we are downgrading shares of Dollar Tree to Hold as we believe current valuation captures favorable sentiment and strong fundamental trends.”
Trussell adds that the Street's consensus earnings per share estimate has risen to the high-end of the company's guidance at $1.14 and the Street is expecting gross product margin to dip only 20 basis points year-over-year to 36.7 percent. The analyst notes that greater-than-expected freight costs and merchandise investment could result in downside versus investor expectations.
Trussell also notes that a scenario in which
Dollar General buys
Family Dollar and Dollar Tree buying stores and stock is accretive, but already anticipated by investors. If Dollar Tree closes the deal with Family Dollar, it would also be accretive but with synergies being back-end loaded in years two and three and carry “material execution risk."
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