Dollar Tree, Inc. (NASDAQ:DLTR) ought to consider unloading its underperforming Family Dollar Stores on a big, hungry retailer like, oh, say, Amazon.com, Inc. (NASDAQ:AMZN), says Loop Capital Markets analyst Anthony Chukumba.
“In addition, we believe a Family Dollar sale would likely be EPS accretive, and could result in significant stock price appreciation.”
Family Dollar Results Lackluster
He rated Dollar Tree a Hold and set a target price of $80. In Wednesday trading, Dollar Tree traded down 1.29 percent.
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Dollar Tree acquired Family Dollar in 2015, but the merger hasn’t worked out, he said.
“Given Family Dollar's continued struggles, we believe Dollar Tree management should consider divesting Family Dollar,” he said. “We estimate selling Family Dollar would be $0.23, or 4.9 percent accretive to our current Dollar Tree F2018 diluted EPS estimate.”
He said he doesn’t believe a Family Dollar divestiture is a compelling reason to purchase Dollar Tree stock.
“That said, we think the possibility of such a transaction provides a level of downside protection — particularly if Family Dollar continues to underperform. Thus, we maintain our Hold rating.”
_____ Image Credit: "Family Dollar 50th Anniversary Flagship Store, Charlotte, NC" By Jml0519 at English Wikipedia, CC BY-SA 3.0, via Wikimedia Commons
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