Why Morgan Stanley Says Dollar General Is A Good Defensive Play

Although Dollar General Corp’s DG stock has outperformed the market year-to-date, it has performed in-line with other defensive stocks, according to Morgan Stanley.

The Dollar General Analyst: Simeon Gutman upgraded Dollar General from Equal-Weight to Overweight while raising the price target from $225 to $250.

The Dollar General Takeaways: The stock could continue to outperform in a prolonged downturn given the company’s material earnings and valuation upside, Gutman said in the upgrade note.

“Even if the economy doesn't enter a recession, the business is an earnings compounder, there are several idiosyncratic catalysts/initiatives, DG's margin trajectory is more durable than we appreciated entering the year, and we anticipate a more difficult next 6-12 months for much of Retail given wallet share shifts,” the analyst said. "Thus there are multiple ways for DG to outperform," he added.

“DG fits our theme of favoring quality, defensive retailers with offensive characteristics, It is arguably our most defensive, counter-cyclical company,” Gutman further said.

DG Price Action: Shares of Dollar General had declined by 0.87% to $230.24 at the time of publication Thursday.

Photo via Shutterstock.

Posted In: Morgan StanleySimeon GutmanAnalyst ColorUpgradesPrice TargetAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.