Bank of America raises this dollar store's price target ahead of earnings

Bank of America analyst Robert Ohmes raised his price target for Dollar General to $115, a 14.3% upside from Thursday's close, citing the company's discounted valuation, strategic initiatives, and potential market share gains from competitor closures. Ohmes anticipates improved comparable store sales and profitability into 2025, driven by Dollar General's 'back to basics' strategy and expanding digital presence, projecting $1.40 in adjusted EPS and 1% comparable store sales growth; this bullish outlook contrasts with the prevailing 'hold' rating among most analysts.

Analysis

Bank of America analyst Robert Ohmes presents a notably bullish outlook on Dollar General (DG), increasing the price target by $15 to $115, which suggests a 14.3% potential upside from Thursday's closing price and marks a new high among Wall Street analysts surveyed by LSEG. This optimism is rooted in the belief that DG's current stock valuation, which is at a discount to historical levels and peers, already incorporates competitive and expense risks. Ohmes anticipates a favorable trajectory for comparable store sales and profitability improvement into 2025, especially in the second half, driven by increasing visibility on strategic initiatives, market share gains from competitor store closures, and the efficacy of the company's "back to basics" strategy. He projects $1.40 in adjusted earnings per share and 1% growth in comparable store sales, supported by observed accelerating sales data in the first quarter that surpassed flat estimates. This buy rating positions Ohmes as an outlier, contrasting with the majority 'hold' consensus on the Street. Despite potential concerns over Walmart's outperformance, Ohmes highlights Dollar General's competitive price gaps and expanding digital presence as significant tailwinds. The stock has already demonstrated strong momentum, rallying over 32% year-to-date, positioning it for its first positive annual performance in three years.

Key Decisions for Investors

• Investors may consider Dollar General as a potential investment opportunity given the contrarian buy rating, significant price target upside, and the stock's current valuation discount relative to its history and peers.
• Closely monitor Dollar General's upcoming earnings report on June 3, paying particular attention to comparable store sales figures and management's commentary on strategic initiatives and the 2025 outlook to validate the analyst's optimistic projections.
• Evaluate the ongoing execution of the "back to basics" strategy, digital expansion, and actual market share capture from competitor closures as key indicators of sustained performance improvement throughout 2024 and into 2025.