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Five Below Shares Hit Record High in After-Hours Trading on Upbeat Earnings; Target Price $235

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U.S. discount retailer that sells products that cost up to $5 Five Below’s shares hit a record high in extended trading on Wednesday after the company reported better-than-expected earnings and revenue in the fourth quarter.

The Philadelphia, Pennsylvania-based company said its net sales increased by 24.9% to $858.5 million from $687.1 million in the fourth quarter of fiscal 2019; comparable sales increased by 13.8%. That was above the analysts’ expectations of $857.1 million.

Five Below said its net income increased by 12.3% to $123.9 million from $110.4 million in the fourth quarter of fiscal 2019. Diluted income per common share was $2.20 compared to $1.97 in the fourth quarter of fiscal 2019. That was also higher than the Wall Street consensus estimates of $2.11 per share.

Following this upbeat result, Five Below shares, which surged over 36% in 2020, hit a record high of $207.25, rising 6% in extended trading on Wednesday.

For the first quarter, Five Below forecasts net sales between $540 million to $560 million based on opening approximately 60 new stores. Diluted income per common share is expected to be in the range of $0.56 to $0.68 on approximately 56.4 million diluted weighted average shares outstanding.

Analyst Comments

“4Q results were exceptional, the outlook very strong, and the long-term looks ever more compelling. As 2021 unfolds, we anticipate strong sales growth and margin expansion, rent terms to become even more favorable, and FIVE’s competitive position to strengthen. Breaking the “5 Buck” could take the story into another gear as well, so we continue to recommend purchasing FIVE shares. Our earnings estimates increase, and we increase our price target to $250,” noted Randal J. Konik, equity analyst at Jefferies.

“We like FIVE’s nimble, opportunistic business model, and we believe the company has a long pathway for growth, from over 1,000 units now to 2,500+ in the long term. We expect initiatives such as Five Beyond to help grow comps and enhance new store productivity.”

Five Below Stock Price Forecast

Fifteen analysts who offered stock ratings for Five Below in the last three months forecast the average price in 12 months of $203.79 with a high forecast of $235.00 and a low forecast of $143.00.

The average price target represents a 3.97% increase from the last price of $196.01. Of those 15 analysts, 11 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $225 with a high of $295 under a bull scenario and $130 under the worst-case scenario. The firm gave an “Overweight” rating on the delivery services company’s stock.

Several other analysts have also updated their stock outlook. CFRA raised the stock price forecast to $230 and RBC upped the price target to $225 from $209. Craig Hallum boosted their target price on Five Below to $208 from $197.

Moreover, Deutsche Bank boosted their target price to $202 from $174 and gave the stock a “buy” rating. Berenberg Bank initiated and issued a “hold” rating on the stock. JPMorgan lifted their price target to $195 from $178 and gave the stock an “overweight” rating.

“A rare reopening story with robust underlying growth & comp-driving initiatives in place. Path to well over $4/$5 in ’21/’22 EPS increasingly visible. Our estimates tick higher, as does our price target to $225. Not as much upside now as in the past, but we stay Overweight behind our bullish fundamental view,” Simeon Gutman, equity analyst at Morgan Stanley.

“We believe expectations were already high for the last few weeks of Q4 (post-Holiday update) and QTD. However, the magnitude of the January comp acceleration (likely to >30%) and above Street Q1 sales guidance (22% above at the midpoint) likely surpassed even the most bullish views. Stimulus is the clear driver here, but comps were running up double digits for most of the back half of 2020 and into 2021 even before the stimulus boost. For context, Q1’20 guidance implies a similar absolute sales outcome as if FIVE had delivered high-single-digit comps in each of Q1’19 and Q1’20 (in a non-COVID world).”

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This article was originally posted on FX Empire