Summary:
- Dollar Tree Inc (NASDAQ:DLTR) fell 15% on Tuesday after the company posted earnings that missed Wall Street expectations.
- Based on its market cycles, we believe the stock has further downside risk before a potential bounce.
The company reported earnings per share of $1.08 and total revenue of $5.75 billion, compared to analyst estimates of $1.13 and $5.74 billion. Looking forward, management lowered their earnings guidance to $1.70 to $1.80 per share, compared to the $2.02 consensus.
CEO Gary Philbin blamed tariffs imposed by the US government on Chinese imports and said the expected the impact on earnings guidance is $0.06 per share for the current quarter.
Our approach to stock analysis uses market cycles to project price action. On the weekly chart above, we can see that DLTR is in the declining phase of its current cycle, with time still remaining. We also note the megaphone top in formation.
On the daily chart, we can clearly see the gap lower on significant volume, from which it will be hard for DLTR to recover fully. The timing for the next cycle low is between mid-December and mid-January. Our target is the $89 support level from the previous cycle.
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