Analyst: Note Dollar General Stock's "Thesis-Shift Cover"

Two additional analysts slashed their price targets

Deputy Editor
Jun 5, 2023 at 9:56 AM
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Dollar General Corp. (NYSE:DG) is down 2% at $162.78 this morning, after Morgan Stanley downgraded the shares to "equal weight" from "overweight." In its bull note, the analyst said the discount retailer's recent quarterly results showed a "thesis-shift cover," with the company saying the challenging economic environment was the catalyst for an earnings miss and full-year guidance slash.

In addition, Citigroup and J.P. Morgan Securities cut their price targets to $185 and $187, respectively.  There's plenty of room for positive sentiment to unwind, considering 13 of the 20 covering brokerages rate Dollar General stock a "buy" or better, and the 12-month consensus of $198.46 is a 21.1% premium to last night's close.

It looks like an unwinding of pessimism is overdue, consider analysts high hopes come even as the equity sports a 32.5% year-to-date deficit, with a 26.1% 12-month loss to boot. Coming into today, Dollar General stock was already trading at more than three-year lows, after logging its fifth-straight weekly loss and its fifth month in the read already in 2023.

A shift in the options pits could also weigh on DG, as options traders have favored bullish bets over the last 50 days. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 50-day call/put volume ratio of 1.24 that stands higher than 96% of readings from the last year.

Those looking to speculate with options are in luck. Dollar General stock is seeing attractively priced premiums at the moment, per its Schaeffer's Volatility Index (SVI) of 26%, which sits in the relatively low 32nd percentile of its annual range.


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