New Five Below Price Target as Surprising Rally Drives Guidance Boost
Shares of the discount retailer have gained 64% this year, and look poised for further gains.
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Quick, name a retailer that plans to open 150 new stores this year.
Seems like a trick question, right?
For years, we’ve watched once-dominant retailers like JCPenny and Macy's (M) become shadows of their former selves. In extreme cases, former mall mainstays like Modell’s Sporting Goods and Forever 21 closed all of their U.S. locations, and moved what’s left of their businesses online.
Meanwhile, Five Below (FIVE) opened 87 stores in the first half of their fiscal year, and 50 locations in its just-ended third quarter. The Philadelphia-based retailer should have no trouble reaching its goal of 150 new stores by the end of its fiscal year, which extends to the end of January.
Five Below Just Raised Guidance
The company reported its fiscal third quarter earnings after Wednesday’s close, handily beating estimates. As a result, the stock climbed modestly in after hours trading, adding to its 64% year-to-date gains.
That’s more than double Nvidia’s (NVDA) year-to-date gain of 29.8%.
Five Below also increased full-year sales guidance, as well as its estimates for fourth quarter earnings and revenue. In the third quarter, sales were up by 23.3% over the year-ago period, while comparable sales climbed 14.3%.
Five Below’s Bullish Chart
Technically, Five Below is still regaining ground from a disastrous 2024, a year in which the stock lost half its value. On the bright side, shares of the retailer have more than tripled since trading at their April low of $52.
Five Below seems likely to expand on those gains, as the stock has formed an ascending triangle pattern (black lines). That bullish formation suggests Five Below should continue its ascent to the $190 area.
In order to break out from that bullish consolidation pattern, Five Below shares need to close above $169. A move to that level would place the stock at a new 52-week high.
Not Just Another Discount Store
Five Below is often lumped in with dollar store retailers such as Dollar Tree (DLTR) , which also beat earnings estimates on Wednesday. Like Five Below, Dollar Tree is expanding aggressively, with plans for 300 new stores in fiscal 2025.
However, that’s where the comparisons end. With its fun vibe, bright colors and quirky attitude, Five Below in many ways is the antithesis of the typical discount store. "Let go and have fun" is one the company's slogans, and it captures the vibe of the stores.
Bottom Line
Along with Walmart (WMT) , which we recently covered, Five Below has been one of our core retail holdings for years. That will continue to be the case for the foreseeable future.
At the time of publication, Ponsi was long WMT and FIVE.
