Credit Suisse is encouraging investors to take advantage of a "rare discount" in Five Below Inc (NASDAQ: FIVE)'s stock after the company disappointed investors with poor preliminary fourth quarter and 2020 guidance.
Judah Frommer upgraded Five Below from Neutral to Outperform with an unchanged $125 price target.
Five Below's preliminary fourth quarter guidance fell below the low-end of management's prior outlook, Frommer wrote in the note. However, conversations with management suggest the miss is mostly due to a holiday calendar shift. The company faced six fewer selling days from Thanksgiving to Christmas while the impact was "mis-modeled to some extent."
Meanwhile, Five Below's comps were all positive for comparable periods like Black Friday, Cyber Week, and the final seven days of the Holiday season, the analyst wrote. Now that fourth quarter results are "de-risked to a large extent," investors can focus on four potential headwinds which can help lift the stock back to its multi-year P/E multiple.
The four catalysts include the signing of the U.S.-China trade deal, remodels at around 60 stores, new rollouts of the "Ten Below Zones" in new stores, and two additional selling days during the 2020 holiday period compared to 2019.
Blaming poor sales performance on shifting calendars is seen by some as an easy excuse. Were consumers really caught off guard by the calendar that they forgot to buy presents?
FIVE Price Action
Shares of Five Below were trading up 6.13% at $114.04.
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