Five Below's Q3 Proves There's Life After Fidget Spinners

Five Below Inc FIVE reported major top- and bottom-line beats Thursday with fourth-quarter guidance well above Street estimates.

Management optimism didn't widely resonate with analysts, as UBS maintained a Hold and Gordon Haskett downgraded to Hold on the earnings catalyst. But the report reinforced at least one bull thesis.

The Rating

Buckingham Research Group analyst Kelly Crago reiterated a Buy rating for Five Below and raised the price target from $62 to $75.

The Thesis

Crago attributed Five Below’s 8.5-percent comps growth to balanced strength across categories, reflecting improvements in product offerings and marketing.

“[This] will only continue to improve further as the company grows in scale and reinvests in product,” Crago said. 

Buckingham perceives upside to the fourth-quarter comps guidance of 4-6 percent considering holiday-driven acceleration seen quarter-to-date and strong demand in Star Wars merchandise and Hatchimals.

“FIVE remains one of the strongest and most consistent growth stories in retail with the opportunity to deliver more than 20 percent EPS growth for the foreseeable future,” Crago said. 

She forecasted 2018 generation of $5 in cash per share and anticipates “shareholder-friendly” decisions, including potential dividends or buybacks.

Price Action

At the time of publication, Five Below was trading down 1.4 percent at $60.97.

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