Wells Fargo: Dollar Tree A 'Sound Investment In An Uncertain Landscape'

Dollar Tree, Inc. DLTR should be considered a "sound investment in an uncertain landscape" although there is still a certain degree of risk involved, according to Wells Fargo.

The Dollar Tree Analyst

Edward Kelly maintains an Overweight rating on Dollar Tree's stock with a $97 price target.

The Dollar Tree Thesis

Dollar Tree is well-positioned to navigate through the coronavirus backdrop and could be a major beneficiary of stimulus measures created in response to the crisis, Kelly wrote in a note.

If history repeats itself, Dollar Tree should "perform well" if the coronavirus outbreak is followed by a sustained recession. In fact, the case for buying Dollar Tree's stock existed prior to the outbreak, at current levels, valuation looks to be more reasonable.

American consumers will soon receive their stimulus checks which will offer a comp tailwind in the second quarter and beyond if incremental action is taken afterward, the analyst wrote in the note.

While there is reason to be concerned in a post coronavirus world, Dollar Tree and stores that target low-income workers will outperform as they understand the need to stretch each dollar spent. Dollar Tree, in particular, is known to offer low prices and small pack sizes. It can also prove to be a substitute for more expensive options as consumers feel the need to trade down.

DLTR Price Action

Shares of Dollar Tree were trading lower by more than 7% at $73.60.

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