Is it time to buy Dollar Tree shares as UBS ups price target ahead of earnings?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Nov 22, 2021
  • Dollar Tree shares on Monday fell by 1.42% despite receiving a price boost from UBS.
  • The first raised its price target to $155 per share from $130.
  • Dollar Tree will report its fiscal Q3 results Tuesday before markets open.

On Monday, Dollar Tree Inc. (NASDAQ:DLTR) shares edged lower by 1.42% despite receiving a price target boost from UBS. The firm raised its DLTR price target to $155 per share from $130 citing tailwinds from sustained demand for Family Dollar products. The analysts expect a core same-store growth of about 2% compared to the consensus Street estimate of 1.1%.

Dollar Tree will announce its fiscal third-quarter results on Tuesday before markets open. Analysts expect earnings per share to fall by 31.7% to about $0.95 per share, while revenue is expected to edge higher by 3.9% to about $6.42 billion. Dollar Tree has outperformed earnings expectations in each of the last seven quarters.

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Is Dollar Tree a growth stock?

From an investment perspective, Dollar Tree shares trade at reasonable trailing 12-month and forward P/E ratios of 21.26 and 21.34, respectively. Therefore, the stock could be an interesting option for value investors.

In addition, analysts expect its earnings per share to grow by nearly 63% this year before rising at an average annual rate of about 10.48% over the next five years. Therefore, the stock could also gain the attention of long-term growth investors.

Although Dollar Tree shares are up more than 57% since the 24th of September, the stock has gained just over 24% this year, thus underperforming the S&P 500 Index, which is up about 27%.

Source – TradingView

Technically, Dollar Tree shares seem to be trading within an ascending channel formation in the intraday chart. As a result, the stock has spiked to the overbought conditions of the 14-day RSI. 

Therefore, investors could target potential pullback profits at about $128.91, or lower at $122.95, while $138.22 and $144.09 are crucial resistance zones.

It could be time to take some profits

In summary, although UBS just boosted its DLTR price target, the stock seems to have spiked significantly recently, thus creating an opportunity for a technical pullback. 

As a result, now could be a good time for profit-takers to swoop in.

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