Five Below Still California Dreamin', Will Enter The State This Quarter

Despite slight fourth-quarter beats in both EPS and same-store sales, Five Below Inc FIVE was retained at a Hold rating by Deutsche Bank Thursday.

The firm wrote in a note that it was “cautious on 1Q as comp guidance (flat to up 2 percent) implies an acceleration on a two-year stack basis at the mid-point, which has not been achieved since 4Q15.”

The analysts added that, in spite of a projected 20-percent growth in EPS long term, they predict no change in valuation.

Here’s The Good News

Deutsche Bank balanced its skepticism with hope in Five Below’s impending expansion into California. In fact, it expects the addition of nearly 100 stores (or a 20-percent square footage growth), coupled with fresh marketing initiatives and enhanced merchandising, to provide the company a needed boost.

Analysts were further encouraged by management’s positivity regarding consumer trends and Five Below’s Easter products.

Considering better-than-expected first-quarter guidance and a yet-intact strategy for long-term growth, Deutsche Bank raised its price target from $40 to $48 and estimated a 2017 EPS of $1.60 and first-quarter gain of $0.13. Risks include improved traffic trends and GPM deterioration.

Shares were trading up 11.3 percent Thursday at of $42.68.

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Five Below Up 11% After Solid Q4 Beat; Loop Capital Reiterates A Buy