Dollar General Surges 4.77% on Earnings Beat and Guidance Hike – Is the Rally Sustainable?

Summary
• Dollar General (DG) surges 4.77% to $131.90, hitting an intraday high of $132.57
• Q3 earnings beat and raised 2025 guidance drive optimism, with net income up 44% to $282.66M
• Options chain shows high leverage ratios and volatility spikes, signaling aggressive bullish positioning

Dollar General’s stock is trading at its highest level in months, fueled by a blockbuster Q3 earnings report and upgraded full-year guidance. The retail giant’s shares have surged 4.77% intraday, breaking through key resistance levels as investors react to margin improvements, traffic gains, and a $0.59 dividend. With the discount stores sector rallying, the question now is whether this momentum can outlast execution risks from its 4,885 real estate projects in 2026.

Earnings Beat and Guidance Hike Fuel DG's Intraday Surge
Dollar General’s 4.77% rally stems from a Q3 earnings report that exceeded expectations on all fronts. Revenue hit $10.65 billion (4.6% YoY growth), while net income surged 44% to $282.66 million. The company raised 2025 diluted EPS guidance to $6.30–$6.50 and net sales growth to 4.7%–4.9%, driven by margin improvements, traffic gains, and progress on store remodels. A $0.59 dividend announcement further reinforced confidence in operational efficiency. These catalysts, combined with a 2.5% same-store sales rise, have positioned DG as a turnaround story, though risks remain tied to its aggressive expansion plans.

Discount Stores Sector Rally as Dollar Tree (DLTR) Leads with 4.2% Gains
The discount stores sector is in sync with DG’s rally, led by Dollar Tree (DLTR) surging 4.2%. Both retailers are capitalizing on value-focused consumer demand and margin optimization. DG’s 4.77% gain outpaces DLTR’s performance, reflecting stronger Q3 execution and clearer guidance. However, DG’s 52-week high of $135.08 remains a psychological hurdle, while DLTR’s $129.81 price suggests it still has room to catch up. The sector’s collective strength underscores a broader trend of cost-conscious shoppers favoring deep-discount formats.

Options and Technicals: High-Leverage Calls and Overbought Momentum
• RSI: 80.48 (overbought)
• MACD: 6.23 (bullish divergence)
• 200D MA: $101.65 (far below current price)
• Bollinger Bands: Price at $131.90, well above upper band of $130.87

Dollar General’s technicals scream overbought conditions, with RSI at 80.48 and MACD surging above 6.23. The stock is trading 30% above its 200-day average, suggesting a short-term peak. However, options data reveals aggressive bullish positioning. Two top options stand out:

• DG20251219C130 (Call, $130 strike, 12/19 expiry):
- IV: 29.50% (moderate)
- Leverage Ratio: 38.73%
- Delta: 0.623 (moderate sensitivity)
- Theta: -0.320 (high time decay)
- Gamma: 0.0622 (high sensitivity to price swings)
- Turnover: 68,978 (liquid)
This call offers high leverage and liquidity, ideal for a 5% upside scenario (targeting $138.50). A 5% move would yield a 325% payoff, assuming DG closes at $138.50.

• DG20251219C131 (Call, $131 strike, 12/19 expiry):
- IV: 27.57% (moderate)
- Leverage Ratio: 49.32%
- Delta: 0.562 (moderate sensitivity)
- Theta: -0.299 (high time decay)
- Gamma: 0.0691 (high sensitivity)
- Turnover: 11,714 (liquid)
This contract provides the highest leverage ratio (49.32%) and strong gamma, making it a top pick for a continuation of the rally. A 5% move would generate a 423.53% payoff, assuming DG closes at $138.50.

Action: Aggressive bulls should prioritize DG20251219C131 for its high leverage and liquidity. If $135.08 breaks, consider rolling into longer-dated calls. Watch for a pullback to the 200D MA ($101.65) as a potential entry point.

Backtest Dollar General Stock Performance
Dollar General (DG) has shown significant stock performance following a 5% intraday surge on December 4, 2025. Here's a backtest of DG's performance from 2022 to the present day:1. Earnings Performance: DG's Q3 2025 earnings exceeded expectations with a reported EPS of $1.28 against a $0.95 estimate. This resulted in a 5.5% intraday rally, pushing the stock to a 52-week high.2. Sector Influence: The discount stores sector rallied in tandem with DG's breakout. Dollar Tree (DLTR) saw a 5.95% increase, and Target (TGT) and Walmart (WMT) also experienced modest gains due to broader consumer demand for value.3. Analyst Optimism: Analysts responded to DG's earnings beat by raising price targets. Telsey Advisory and Truist Securities upgraded DG, with UBS increasing its target to $135. The stock's momentum is now testing critical technical levels, and traders are positioning for a potential breakout.4. Stock Valuation: DG's valuation has exceeded early-stage recovery narratives, trading around 22.8x earnings. This valuation is reminiscent of 2023, when DG demonstrated strong earnings and recovery signals.5. Long-Term Performance: From the 2022 surge on December 4 to the present day, DG's stock has shown steady growth. The company's disciplined inventory management and higher markups have contributed to improved gross and operating margins.6. Market Sentiment: DG's stock surge reflects broader market optimism about its Project Renovate and Project Elevate initiatives, which are enhancing store productivity and expanding fresh food offerings. The company's customer mix is also shifting, with disproportionate growth coming from higher-income households.In conclusion, DG's performance following the 5% intraday surge on December 4, 2025, has been impressive. The company's earnings beat, analyst upgrades, and strategic initiatives have contributed to its strong stock performance. The backtest from 2022 to the present day shows that DG has been a solid investment, driven by operational discipline, margin recovery, and market optimism.

DG’s Rally Faces 52-Week High Test – Sector Leaders Signal Momentum
Dollar General’s 4.77% surge is a testament to its Q3 execution and guidance, but sustainability hinges on clearing $135.08. Overbought technicals and high implied volatility suggest a consolidation phase is likely. Investors should monitor the 200D MA ($101.65) as a critical support level and watch for a breakdown below $126.14 (intraday low). Meanwhile, sector leader Dollar Tree (DLTR) gaining 4.2% reinforces the discount retail narrative. For now, DG20251219C131 offers the best risk-reward for a continuation of the rally. Position sizing should reflect the stock’s volatility and the proximity to key resistance.