Dollar Tree shares soar as Wall Street celebrates Family Dollar deal
UBS says the budget retailer can (finally) focus on its core business.
Shares of Dollar Tree jumped nearly 10% after the company’s Family Dollar sale sparked optimism on Wall Street.
In a note Thursday, UBS analyst Michael Lasser reiterated the firm’s “buy” rating on the stock and $95 price target, implying nearly 27% upside potential. To justify the call, Lasser pointed to Dollar Tree’s announcement Tuesday that it had reached a deal to sell its struggling Family Dollar business for $1 billion. He believes the deal will give the company “fuel for room for investing in its core business,” including new store growth.
“Importantly, we think the stock should be rewarded with a higher multiple over time given the sale of FDO. We think the stock is set up well to outperform,” Lasser said in the note.
UBS also called out Dollar Tree’s $804 million in proceeds from the Family Dollar sale, along with a $350 million tax shield, which should give the company more financial flexibility to improve cash flow and buy back shares. Dollar Tree shares are down 43% over the past year.
