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2 Takes On Ollie's Bargain's Q1: KeyBanc Bullish, Wells Fargo Neutral

Jayson Derrick

Extreme value retailer Ollie's Bargain Outlet Holdings Inc (NASDAQ: OLLI) reported first-quarter results Thursday that KeyBanc Capital Markets said were "solid" — but Wells Fargo views as a "somewhat low-quality" beat-and-raise.

The Analyst

KeyBanc's Bradley Thomas maintained an Overweight rating on Ollie's Bargain's stock with a price target lifted from $108 to $110.

Wells Fargo's Edward Kelly maintained at Market Perform with a price target lifted from $75 to $85.

KeyBanc Says Ollie's A Core Holding

Ollie's reported a 2-cent EPS beat at 46 cents, but comp growth missed expectations of 1 percent due to a challenging weather environment, Thomas said in a Thursday note.

Comps in the quarter were driven by an increase in average basket size, but a decrease in transactions due to weather headwinds, the analyst said.

Thursday's report marks the 20th consecutive quarter of comp growth at Ollie's, he said. 

The retailer lifted its full-year EPS guidance to a range of $2.13 to $2.17 and maintained its comp outlook of 1-2 percent, Thomas said. 

The guidance implies the long-term outlook remains "very positive," as the company continues to take advantage of volatility trends at retailers and manufacturers, he said. Ollie's also has minimal exposure to tariffs and could even benefit if rival retailers raise their prices to minimize their tariff-related exposure, the analyst said. 

Ollie's remains among the most attractive retail growth stories, and the stock should be considered a core small-cap growth holding, according to KeyBanc. 

Wells Fargo: 'Mixed' Performance

Ollie's reported an earnings beat, but digging beyond headline numbers shows "more mixed" performance, Kelly said in a Thursday note.

View more earnings on OLLI

The 0.8-percent comp growth not only fell short of the Street's estimate, but decelerated notably on a stacked basis, the analyst said. The retailer is openly discussing potential headwinds from cannibalization as a potential drag on comps, he said. 

Ollie's stock has gained 47 percent since the start of 2019 and trades at 45 times earnings, Kelly said. The elevated multiple suggests the stock should have traded down after the "low-quality" report, the analyst said — and ahead of difficult comp comparisons in the rest of the year.

The bottom line from Wells Fargo: Ollie's is among the few insulated models within the retail space, but the risk-reward profile at is difficult to justify.

Price Action

Ollie's shares were down 2.12 percent at $95.54 at the time of publication Friday. 

Related Links:

Analysts Mixed On Ollie's Bargain Outlet After Q4 Earnings

Ollie's Bargain CEO Doubles Down On Brick-And-Mortar Retail

Photo by Dwight Burdette/Wikimedia

Latest Ratings for OLLI

Date Firm Action From To
May 2019 Initiates Coverage On Buy
Mar 2019 Maintains Equal-Weight Equal-Weight
Jan 2019 Maintains Equal-Weight Equal-Weight

View More Analyst Ratings for OLLI
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