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Evercore ISI's bullish Five Below call met with downgrade from Wells Fargo

Published 01/04/2024, 02:17 PM
Updated 01/04/2024, 02:19 PM
© Reuters.  Evercore ISI's bullish Five Below (FIVE) call met with downgrade from Wells Fargo
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Analysts at two different firms are split in their view of where Five Below (NASDAQ:FIVE) shares could be headed, with Wells Fargo downgrading the stock and Evercore ISI upgrading the stock on Thursday.

Wells Fargo lowered shares of the discount retailer to Equal-Weight from Overweight, maintaining a $215 per share price target.

Analysts told investors in a note that upside seems limited for the stock. In the broad-based note covering the food and staples retail sector, Wells Fargo stated that it sees choppiness ahead for the traditionally defensive sector due to fundamental concerns and soft-landing optimism.

"Selectivity seems key; we favor names best positioned to navigate the risky backdrop and those with idiosyncratic tailwinds," the analysts wrote.

On the other hand, Evercore ISI raised FIVE to Outperform from In Line, lifting the price target to $245 from $215 per share. Analysts noted the rising spending intention across their survey work, potential benefits from initiatives medium to long term, and improvement in their Retail Sales Lead Indicator (RSLI) after several sluggish years are reasons to be constructive.

"We are adding 50bps to our comp outlook to reflect share gain and an improving RSLI, while raising EPS ~2%," the analysts said. "We see [the] opportunity for 4k Five Below locations to support mid-teen store growth, with EBIT margin recovering to the 12-13% range vs. around 11% currently (freight/ scale) a rare combination in a mature U.S. retail landscape."

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