What Happened?
Shares of discount retailer Five Below (NASDAQ:FIVE) jumped 1.6% in the afternoon session after Truist upgraded the stock to 'Buy,' citing a turning point for the company following a strong quarter.
The brokerage firm also raised its price target to $216. This move followed another vote of confidence from Morgan Stanley, which increased its price target on the stock to $190. The wave of positive analyst ratings came after the discount retailer announced impressive third-quarter results. Five Below's revenue jumped by more than 23% compared to the same period in the previous year, driven by a remarkable 14.3% surge in sales at established stores. This performance significantly beat the company's own forecasts. Following the strong quarter, the company also raised its sales guidance for the full year, signaling confidence in its continued growth.
After the initial pop the shares cooled down to $176.09, up 1.7% from previous close.
Is now the time to buy Five Below? Access our full analysis report here.
What Is The Market Telling Us
Five Below’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 3.8% on the news that the company reported third-quarter results that far exceeded its own forecasts and Wall Street's expectations. Revenues for the quarter reached $1.038 billion, a significant 23.1% increase compared to the same period in the previous year. This growth was mainly fueled by a remarkable 14.3% surge in same-store sales, which was well above the company's guided range of 5% to 7%. The strong sales performance came from both an increase in customer transactions and a higher average ticket size. Furthermore, adjusted earnings per share came in at $0.68. This figure was nearly three times the upper end of the company's own guidance of $0.12 to $0.24 and beat analysts' consensus estimate by $0.42.
Five Below is up 77.7% since the beginning of the year, and at $176.09 per share, has set a new 52-week high. Investors who bought $1,000 worth of Five Below’s shares 5 years ago would now be looking at an investment worth $1,067.
The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. Click here for access to our special report that reveals one profitable leader already riding this wave.