Dollar Tree Stock Chopped After Weak Forecast

Dollar Tree also forecast weak sales and profit for its first-quarter

Lillian Currens
Mar 4, 2020 at 10:05 AM
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Discount retailer Dollar Tree, Inc. (NASDAQ:DLTR) opened at a two-year low of $79.93 this morning, and was last seen down 1.3% at $80.76, after a mostly disappointing fourth-quarter earnings report. The company posted profits of $1.79, which exceeded analysts' estimates, but announced $6.32 billion in revenue, which missed analyst estimates. Dollar Tree also forecast weak sales and profits for its first-quarter, thanks to mounting tariff pressure and steeper discounts. 

Dollar Tree had already been struggling on the charts. Since gapping beneath the $96 level in late-November, the equity has been chopping lower, down 14% year-to-date coming into today. While the security attempted to brush off the sell-off late last month, the 70-day moving average quickly snuffed out this rebound. Today marks the first time DLTR has traded below the $80 region since Oct. 2018. 

Understandably, analysts have been cautious on DLTR, with 13 of the 18 in coverage calling it a "hold." There's still room for downgrades however. Four analysts covering the stock consider it a "buy" or better. 

The options pits have been quite bullish, per the security's 50-day call/put volume ratio of 2.81 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the elevated 78th percentile of its annual range, suggesting a bigger-than-usual appetite for long calls of late. 

Short sellers have started jumping ship in droves. Short interest fell 35.6% in the last two reporting periods, and now represents a slim 1.9% of DLTR's available float. Should today's negative price action continue, a change of heart from the bears could put even more pressure on the charts.


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