Morgan Stanley raises Dollar Tree stock price target to $96 from $80

Morgan Stanley raised its Dollar Tree (DLTR) price target to $96 from $80, maintaining an Equalweight rating, citing the company's strong Q1 2025 performance and upward revisions to EPS estimates for 2025 and 2026 by roughly 5% and 6% respectively. The updated target is based on a 15x multiple of projected 2026 EPS of $6.39. Other analysts, including Goldman Sachs and Telsey, also raised their price targets, while KeyBanc reiterated a Sector Weight rating, noting strong comparable sales growth despite tariff challenges.

Analysis

Morgan Stanley has revised its price target for Dollar Tree (DLTR) upwards to $96 from $80, maintaining an Equalweight rating, primarily driven by a strong first-quarter 2025 performance and enhanced earnings outlook. Their valuation is now based on approximately 15 times projected 2026 earnings per share (EPS) of $6.39, an increase from a previous 13x multiple. Morgan Stanley also raised its EPS estimates for 2025 and 2026 by roughly 5% and 6% to $5.50 and $6.39, respectively, forecasting comparable sales growth of 4.6% for 2025 and 4.0% for 2026. While segment gross margins are expected to expand by approximately 65 basis points in 2025, segment SG&A expenses are projected to deleverage by about 100 basis points in the same year before leveraging by 10 basis points in 2026. This translates to anticipated EBIT growth of 5% in 2025 and 13% in 2026, with EPS growth of 8% and 16% for those years. Dollar Tree, currently trading at $88.62 with a P/E ratio of 19.08 and a market capitalization of $18.62 billion, reported Q1 2025 adjusted EPS of $1.26, beating the $1.21 forecast, though revenue of $4.6 billion fell short of the $4.72 billion expectation. The stock has demonstrated a 22.13% price return over the past six months, and InvestingPro data indicates it may be undervalued, with 8 analysts revising earnings estimates upwards. Other analysts have also adjusted targets: Goldman Sachs raised its target to $94 (maintaining a Sell rating), Telsey to $100 (Market Perform), and KeyBanc reiterated a Sector Weight rating, acknowledging strong 5.4% Q1 comparable sales growth but noting tariff challenges. Dollar Tree is progressing with its MultiPrice 3.0 format conversion, aiming for half its stores by year-end, and management remains optimistic despite tariff headwinds, maintaining full-year guidance.

Key Decisions for Investors

• Investors should consider the improved earnings outlook and multiple price target increases as positive signals, reflecting analyst confidence in Dollar Tree's revised strategy and recent performance.
• Monitor the company's ability to meet revenue expectations, manage tariff impacts, and successfully execute its MultiPrice 3.0 store conversions, as these are key factors influencing future profitability and stock valuation.
• Given the mixed analyst ratings despite target upgrades (e.g., Equalweight from Morgan Stanley, Sell from Goldman Sachs), a balanced approach is warranted, weighing the company's growth initiatives and recent momentum against persistent SG&A pressures and external challenges like tariffs before making significant investment changes.