Dollar General Stock Upgraded Ahead of Earnings

The company will report earnings Thursday, March 18

Assistant Editor
Mar 15, 2021 at 10:11 AM
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Dollar General Corp (NYSE:DG) stock is up 1.4% to trade at $194.41 at last check, after Atlantic Equities upgraded the discount retailer to "overweight" from "neutral," with a price target of $243. The analyst in coverage foresees a boost in sales correlated with another round of stimulus checks, and cited the stock's current valuation and continued market share gain. 

After trading as high as $225.25 back in November, Dollar General stock has since carved out a channel of lower highs. While the equity recently staged a bounce off of the $175 region, its so far facing off with its descending 30-day moving average, a trendline that has guided DG lower in 2021. 

The upgrade comes a few days before the retailer's upcoming earnings report set to release before the open on Thursday, March 18. In the past two years, only three of the eight reports have resulted in a post-earnings gain, including a 10.7% pop in August of 2019. After these reports, DG has averaged a swing of 5.1%, regardless of direction. This time around, the options market is pricing in a larger-than-usual post-earnings move of 7.8%.

Atlantic Equities is joining in on a bullish brokerage bunch. Coming into today, 13 of the 16 in coverage carried a "buy" or better rating, with the remaining three a tepid "hold." Plus, the 12-month consensus price target of $238.68 is a 24.3% premium to current levels. 

Even with earnings looming, premiums are reasonably priced. The stock's Schaeffer's Volatility Index (SVI) of 29% stands higher than just 14% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

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