Telsey raises Five Below stock price target to $128 after strong Q1

Telsey raised its Five Below (FIVE) price target to $128 from $90, maintaining a Market Perform rating, following strong Q1 results that included EPS of $0.86 and a 7.1% increase in comparable sales, both exceeding estimates. The company also issued improved Q2 guidance, projecting EPS between $0.50 and $0.62 and comparable sales growth of 7.0% to 9.0%; however, the outlook for the second half of 2025 is more cautious due to tariff pressures and investment costs, despite overall positive financial health.

Analysis

Telsey analysts have increased their price target for Five Below (NASDAQ:FIVE) to $128 from $90, maintaining a Market Perform rating, driven by the company's robust first-quarter fiscal 2025 results and an improved outlook for the second quarter. Five Below reported Q1 EPS of $0.86, outperforming Telsey’s estimate of $0.84, the FactSet consensus of $0.83, and a broader forecast of $0.66. Q1 revenue reached $970.5 million, a significant 19.5% year-over-year increase, surpassing expectations of $932.86 million. This performance included a 7.1% rise in comparable sales, exceeding both Telsey’s 6.7% projection and FactSet's 5.8% estimate, fueled by strong store traffic (transactions up 6.2%) and a 0.9% increase in average ticket value across diverse product categories and customer demographics. For Q2, Five Below anticipates EPS between $0.50 and $0.62 (FactSet estimate $0.54) and comparable sales growth of 7.0% to 9.0% (FactSet projection 5.4%). Despite this strong near-term momentum and InvestingPro data suggesting the stock, trading near $121, is slightly undervalued with good financial health (liquid assets exceeding short-term obligations, moderate debt, LTM revenue growth of 8.91%, P/E 16.57, market cap $6.73B), the outlook for H2 2025 is cautious due to anticipated tariff pressures, ongoing investments, and reduced leverage from lower expected comparable sales growth. Other analysts reflect this caution: BofA Securities raised its price target to $93 but maintained an Underperform rating, while KeyBanc kept a Sector Weight rating, acknowledging positive merchandising initiatives but citing H2 risks. Five Below revised its full-year fiscal 2025 guidance to sales between $4.3 billion and $4.4 billion, comparable sales growth of 3% to 5%, and adjusted EPS of $4.25 to $4.72. The company is also navigating a CFO transition, with Kristy Chipman stepping down and Ken Bull serving as interim CFO, while management focuses on diversifying vendors to mitigate tariff impacts.

Key Decisions for Investors

• Investors should acknowledge Five Below's strong Q1 fiscal 2025 performance, evidenced by a 19.5% year-over-year revenue increase and EPS of $0.86, and positive Q2 guidance, which supports the current operational momentum and may justify its valuation, especially given InvestingPro's slight undervaluation assessment.
• Careful monitoring of the second-half 2025 outlook is warranted, particularly the impact of increased tariff pressures, ongoing investment costs on profitability, and the anticipated moderation in comparable sales growth, as these factors could influence full-year results.
• The recent CFO transition and mixed analyst ratings (ranging from Market Perform to Underperform) highlight the need to scrutinize management's execution on its revised fiscal 2025 guidance (adjusted EPS $4.25-$4.72) and its strategies for mitigating external pressures and sustaining growth.