Loop Capital upgrades Five Below to Buy, raises target price to $165

Five Below has the potential for a significant turnaround, with Loop Capital upgrading the stock to Buy from Hold and raising its target price to $165, a 27% increase. Analyst Anthony Chukumba believes that Wall Street is underestimating the company's near-term earnings power following recent merchandizing and pricing changes.

Five Below Inc. (FIVE) experienced a significant boost in its stock price after Loop Capital upgraded its rating from "hold" to "buy" and raised its target price to $165. This marks the second upgrade this summer for the discount retailer, following a previous increase from $130 to $160 by UBS and a shift from "underweight" to "neutral" by JP Morgan [2]. The move comes on the heels of Five Below's strong Q1 earnings report and a new partnership with Uber Eats.

Anthony Chukumba, an analyst at Loop Capital, cited several key drivers behind the upgrade. These include sharper merchandising, refreshed marketing, tighter inventory control, and pricing changes. These strategic initiatives are helping Five Below to navigate the choppy retail environment and maintain strong growth momentum. The company's Q1 results showed a 19.5% increase in revenue to $970.5 million, driven by a 7.1% increase in comparable sales, which was primarily driven by a 6.2% increase in transactions and a 0.9% increase in average ticket size [3].

Five Below's stock has been on a steady upward trajectory, gaining over 38% year-to-date. The company's market capitalization stands at $7.35 billion, with an enterprise value of $6.00 billion and a price-to-earnings ratio of 28.0. Despite the positive outlook, analysts remain cautious about potential headwinds from incremental China tariffs and consumer uncertainty in the second half of the year [1].

The latest upgrade from Loop Capital reflects growing optimism about Five Below's ability to recapture a growth multiple and continue its turnaround. However, investors should remain vigilant about the company's earnings guidance and the dynamic tariff environment, which could impact gross margins and earnings growth.

References:
[1] https://www.tipranks.com/stocks/five
[2] https://sherwood.news/markets/five-below-pops-after-wall-street-gives-the-discount-retailer-another-green/
[3] https://seekingalpha.com/article/4812034-five-below-stock-real-turnaround-story