Analyst Eyes Entry Point For Struggling Retail Stock

DLTR is down 22% in 2023 thanks to rough post-earnings bear gaps

Deputy Editor
Oct 17, 2023 at 9:16 AM
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Shares of Dollar Tree Inc (NASDAQ:DLTR) are 2% higher premarket following a bull note from Goldman Sachs. The analyst upgraded discount retail stock to "buy" from "neutral," but cut its price target to $137 from $150. The brokerage praised Dollar Tree stock's valuation, further highlighting the potential for strong earnings growth. Meanwhile, Evercore ISI hiked its price objective by $1 to $130. 

DLTR is set to stage a neat little bounce off its Oct. 3 two-year low of $102.77. Longer term, the stock is off by 22% in 2023 and 19.1% year-over-year, thanks in part to two post-earnings bear gaps of 12.9% and 12% in May and August, respectively. 

Despite the technical troubles, nine brokerages rate DLTR a "strong buy," to go with eight "holds" and one "sell" rating. Meanwhile, the 12-month consensus target price of $150.17 is a 36.4% premium to last night's close.

In the options pits, DLTR sports a 50-day put/call volume ratio of 2.91 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that ranks in the 94th percentile of its annual range. This implies the rate of put buying relative to call buying has been quicker than usual over the last 10 weeks.

Options traders looking to speculate on DLTR's short-term trajectory should consider options. The equity's Schaeffer's Volatility Index (SVI) of 29% is higher than just 30% of all other readings from the past year, suggesting near-term option contracts are attractively priced at the moment, from a historical volatility standpoint.

What's more, the security's Schaeffer's Volatility Scorecard (SVS), which sits at an elevated 88 out of 100, suggesting it exceeded option traders' volatility expectations during the past year. 

 

 

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