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Dollar General Down after Analyst Downgrade
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Dollar General Down after Analyst Downgrade

Shares of Dollar General Corp. (NYSE: DG) were down in morning trading on Monday after the discount retailer was downgraded by Morgan Stanley analyst Simeon Gutman to a Hold from a Buy due to rising macroeconomic uncertainty. The analyst also lowered the price target to $180 from $235 on the stock, implying an upside potential of 11.5% at current levels.

The analyst commented, “We cannot confidently recommend the stock here given the growing uncertainties and unknowns to the DG story and catalyst path. Unlike in past moments when DG underperformed but presented attractive “buy the dip” opportunities (’16 macro headwinds, ’17 investment cycle, ’19 investment cycle), this period of underperformance reflects several, potentially interrelated cross-currents at once that likely inhibits a quicker rebound in the equity in the next 6-12 months.”

Gutman sees rising risk to DG’s forward EPS with rising price investments and labor inflation. Even the retailer’s Q1 results left investors disappointed.

Analysts are cautiously optimistic about DG stock with a Moderate Buy consensus rating based on 12 Buys, eight Holds, and one Sell.

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