Dollar General: Update
Analyst Coverage
Median PT continues to fall; $144.91
Hold ratings take share from overweight:
Q4’23 Earnings Revised 45% lower:
Analyst anticipate weaker ROA and margins:
…but sales to remain solid into 2028, unchanged by Q3 miss:
Cash flow generation and control of leverage:
Making strong case for book value growth:
Competition
DG still has pricing power:
Temu Threat: Report [Read Here]
Summary
Dollar General shares are increasingly attractive. I lower my price target from $150.22 —> $149.57, with a 44% upside.
Last time I covered DG after 2Q earnings [Read here], the upside was just 15.3%. For this reason, I now think Dollar General is reasonably undervalued, but should be approached with caution.
At the current share price, Dollar General should return ~7.65% annually after the S&P 500, for a total 5Yr CAGR of 16.9%.
Updated FCF Analysis:
Analyst Actions
Sell-side Firms
FIRM/ACTION/POSITION/PT
Barclays Maintained Hold $128
BofA Securities Maintained Sell $105
Citi Maintained Hold $146
Deutsche Bank Maintained Buy $157
Evercore Maintained Hold
Goldman Sachs Reiterated Buy $160
HSBC Initiated Sell $102
JP Morgan Maintained Sell $116
Morgan Stanley Maintained Hold $135
Truist Maintained Hold $117
UBS Maintained Hold $145
Other Firms
FIRM/ACTION/POSITION/PT
Institutional Shareholder Services Reiterated Sell
Morningstar Upgraded 5-star $179
S&P Global
Zacks Short-term:Strong-sell, Long-term: Outperform $119