Credit Suisse Upgrades Ollie's Bargain Outlet: Here's Why

• Shares of Ollie's Bargain Outlet Holdings, Inc. OLLI rose 2.32 percent over the last five trading days, after declining 20.9 percent over the past three months.
• Credit Suisse’s Edward J. Kelly has upgraded Ollie’s Bargain Outlet from Neutral to Outperform, reiterating a $20 price target.
• Following the decline in the share price in recent months, Kelly believes that the risk/reward is now more compelling.

Analyst Edward Kelly explained that the company’s “differentiated go-to-market strategy as a closeout retailer, experienced management team and large runway for growth yield an attractive fundamental story over the long-term.”

Although volatility is intrinsic to the company’s “deal-driven” business model, Kelly believes that Ollie’s Bargain Outlet has been able to cope will with the difficult Q2 sales comps, and mentioned that comps were expected to moderate in 2H, “as the company cycles last year's strong results.”

Management has already warned about the possibility of a sales deceleration in the near term and the fundamental outlook for the company’s business remains unchanged.

Ollie’s Bargain Outlet also indicated that “the deal sourcing environment has improved post the IPO and that the opportunity for square footage growth remains robust,” the Credit Suisse report said.