By Senad Karaahmetovic
Ahead of Five Below’s (NASDAQ:FIVE) Q2 earnings report that is due tomorrow, analysts are mostly lowering price targets.
A UBS analyst cut the price target to $165 from $180 as he expects the company to lower its full-year guidance “amid an uncertain macro backdrop.”
“We think downside is well anticipated. As the market looks to next year when FIVE's comps will be on more stable footing, we think the stock will rally,” he tells clients in a note.
The analyst adds that this may prove to be the reset quarter for the company with the outlook lowered to that point “where it is confident that it won't have to lower guidance again.”
“We think it won't need to lower its EPS guidance as much as its sales guidance. Based on our client conversation, the market is expecting a range of $4.30 to $4.50. We think the higher end of that range would be well-received,” he added.
A Bank of America analyst also slashed the price target as he went from $200 to $180. He sees FIVE delivering a “squishy” quarter. The store checks show “elevated promos” while high inventory indicates “weak sell-through.”
“Reflecting our more cautious read on near-term trends, we are lowering our estimates and price objective,” he said in a client note.
Still, the BofA analyst remains bullish on the long-term story growth as well as valuation.
“We expect FIVE will cut its FY22 guidance but still imply an acceleration in 4Q as management expects holiday shopping will drive trade-down, more stores will be in the Beyond format featuring items of more than $5 and inventory will be better in stock,” he added.
FIVE shares are up about 2.8% at the open.