Buy Dollar General shares on raised guidance: Guggenheim

Shares of Dollar General Corp (NYSE: DG) are poised to hit an all-time high by the end of 2022, says John Heinbockel. He’s a Senior Analyst at Guggenheim.

Dollar General shares have upside to $270

On Friday, Heinbockel said the discount retailer was a “buy” with upside to $270 a share that represents a close to 15% upside from here.

The bullish call arrives a day after the chain of variety stores reported solid results for its fiscal second quarter and raised its sales outlook for the full year. The analyst writes:

Dollar General stands out on several fronts. We believe above-average top- and bottom-line momentum should drive outperformance at least through year-end.

The off-price supermarket now forecasts up to a 4.5% increase in its comparable sales this year. Heinbockel also likes Dollar General shares for a $2.0 billion boost to stock repurchase it announced a day earlier.

Last week, Motiur Rahman (Market Analyst at Invezz) also recommended buying “DG” on a retracement.

Dollar General is well-positioned for a recession

A sizable footprint in “food”, as per the Guggenheim analyst, makes Dollar General a great pick for an economic downturn when consumers switch from discretionary spending to “staples”.

Heinbockel is convinced higher labour cost is a temporary headwind, likely to wane in the coming months. Other reasons for buying this stock include 55 cents a share of quarterly cash dividend declared this week. 

All in all, it’s a rather bold call considering the Dollar General shares are already up more than 25% over the past three months.

In the same note, Heinbockel trimmed his price objective on peer Dollar Tree to $170 a share.