On Monday, JPMorgan analyst Matthew Boss adjusted his stance on Five Below (NASDAQ:FIVE) stock, upgrading the company’s rating from Underweight to Neutral. Alongside the rating change, Boss also revised the price target downward to $57.00, a significant reduction from the previous $98.00 target. The stock currently trades at $56.77, having declined over 65% in the past year. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis.
The adjustment by JPMorgan reflects Boss’s view of the challenges and opportunities that lie ahead for Five Below. Boss noted that the retailer is expected to encounter margin pressures through 2025, which could limit earnings growth due to increased labor investments and executive compensation. Despite these headwinds, the analyst acknowledged the potential for a positive operational profit and loss (P/L) inflection point. The company maintains a healthy gross profit margin of 34.9% and has demonstrated revenue growth of 8.9% over the last twelve months.
Boss pointed to several areas where Five Below might see improvement. These include same-sales growth, particularly in the first half of 2025, which could be bolstered by merchandising opportunities in the latter half of the year. Additionally, there is the prospect of unit growth, with a possible acceleration in fiscal year 2026.
Furthermore, there could be an upside to gross margins, with positive impacts expected from pricing strategies in the second quarter of 2025 and potential shrink benefits in the second half of the year that are not currently factored into JPMorgan’s model. These elements could contribute to a turnaround for Five Below as it continues to refine its business strategies, including pricing and product offerings.
In other recent news, Five Below has been the focus of multiple analyst revisions following its fourth-quarter earnings report. UBS analyst Michael Lasser adjusted the price target for Five Below to $110 from $150, maintaining a Buy rating, while noting the company’s turnaround strategy and efforts to enhance its product offerings. Guggenheim also maintained a Buy rating but reduced the price target to $125, citing tariff-related margin pressures and a more conservative earnings guidance. Meanwhile, Truist Securities lowered its price target to $86, maintaining a Hold rating, due to concerns about the impact of tariffs and potential declines in earnings.
KeyBanc maintained a Sector Weight rating, acknowledging Five Below’s strong performance despite tariff complexities, and noted the company’s efforts to derisk the fiscal year by incorporating known tariffs into its guidance. Mizuho Securities cut the price target to $88 from $105, keeping a Neutral rating, and highlighted the company’s challenges in balancing price increases with its value proposition amidst tariff pressures. Analysts have noted that Five Below’s comparable store sales are showing slight improvements, aligning with first-quarter guidance of 0-2% growth. The company is also making strategic adjustments to its merchandise mix and focusing on marketing initiatives to bolster brand awareness. These developments reflect the company’s ongoing efforts to navigate the current retail landscape while addressing tariff-related challenges.
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