Why Morgan Stanley Is "Structurally Bullish" On Five Below

Five Below Inc’s FIVE stock is currently trading at a discount on freight and inventory fears, which appear overblown, according to Morgan Stanley.

The Five Below Analyst: Simeon Gutman upgraded the rating for Five Below from Equal-Weight to Overweight, while leaving the price target unchanged at $230.

The Five Below Thesis: The company’s stock has lost around 25 percent over the past month and now offers a “compelling opportunity” to gain exposure to a strong retail growth story at a discounted valuation, Gutman said in the upgrade note.

“The business appears well-positioned to manage inflationary costs, inventory availability should be sufficient to meet Q4 demand, and we expect FIVE to gain share behind several catalysts,” the analyst wrote.

“FIVE is a high-quality, high-growth compounder (high teens top/bottom line growth algorithm) with a differentiated, defensible value proposition,” Gutman said. “We have long been structurally bullish on the business and inclined to get more positive on pullbacks,” he added.

FIVE Price Action: Shares of Five Below had risen by 5.84% to $186.14 at the time of publication Thursday afternoon.

Photo: Mike Mozart via Flickr