Five Below Has Upside Above $40; Stifel Upgrades To Buy

• Five Below Inc FIVE shares have appreciated 19.51 percent over the past one month, from $30 on December 15, 2015.
• Stifel’s Taylor G. LaBarr has upgraded the rating on the company from Hold to Buy, with a price target of $42.
• LaBarr mentioned that the upgrade reflects key concerns regarding 4Q traffic fading and while macro tailwinds accelerating.

Analyst Taylor LaBarr expects the company to hit “a series of positive inflection points as macro tailwinds accelerate,” and mentioned that the holiday 2015 comp growth of 4.1 percent easily beat the estimates, with the two-year stacked comp accelerating 100bps.

According to the Stifel report, “Traffic was driven by the shift toward digital, social media and TV advertising, with less reliance on print circulars. This shift should continue in FY16 and we believe brand awareness remains a significant multi-year opportunity and potential comp driver.”

LaBarr believes that Five Below is well positioned to benefit during FY16 from its newly relocated distribution center, which has already lead to inventory efficiencies in 4Q15.

The company is also expected to benefit from the success of its new stores across various locations, cost effective ecommerce investments targeted at improving customer engagement and brand awareness, while relieving stores of processing bulk orders, improvements in the physical store environment and economies of scale.

LaBarr also mentioned that Five Below was well positioned to achieve its “20/20 by 2020” target of top and bottom line growth of 20 percent through 2020, making the company one of the fastest growers in retail.