Dollar Tree Plunges Into Buy-Zone: A Robust Rebound Is Expected

Dollar Tree’s (NASDAQ: DLTR) price plunged following its FQ2 earnings report because its market needed a reason to sell. Up nearly 100% from the March 2025 lows, DLTR stock was ripe for profit-taking, and a weaker-than-expected guide was an excuse enough. Although weaker-than-expected, the guidance is overall bullish for the market, affirming the decision to split from Family Dollar and the strength of its position.

Investors looking for this market to fall further may be rewarded, but waiting too long can be risky. The price for DLTR stock is unlikely to fall much below the $96.25 level, if at all, and a robust rebound lies ahead. 

Among the reasons to expect a robust rebound is the capital return. Dollar Tree isn’t paying a dividend, but it is aggressively buying back shares. 

The Q2 year-to-date activity reduced the count by 3.6% and 2.7% respectively, and a recent re-authorization suggests that it can continue at a value-building pace for the foreseeable future. 

The stock price action is not awesome, given the significant 8% price decline posted in the first few hours of trading following the release.

However, the pullback aligns with a market reversal pattern as it is retesting support following June’s move to fresh highs. The June move has this market set up to complete a reversal. The question is whether DLTR’s market will confirm support at $100 or move lower before hitting bottom and starting the subsequent rebound. 

Dollar Tree Leads Retail Peers With Double-Digit Growth

Dollar Tree’s reported results are down compared to last year's due to its sale of Family Dollar. The details that matter are the robust comparisons for continuing operations. The company produced $4.6 billion in net revenue, a 12.3% gain that leads most in the retail sector. 

Dollar Tree sales were driven by a 6.5% increase in comp store sales, in turn driven by a 3% increase in traffic and a 3.4% increase in ticket average, compounded by a higher store count.

The company opened 106 new Dollar Trees and converted nearly 600 others to the new, better-performing, 3.0 format. The 3.0 format includes a broader variety of items in different sizes and price points intended to invigorate store traffic and sales.

The margin news is also solid. The company managed to control costs, leveraging sales to offset increased SG&A expenses. The net result is that operating income grew slightly slower, 7% compared to the double-digit topline advance but still well above consensus. 

Although the adjusted 77 cents in adjusted EPS includes the impact of the timing of tariff payments, the results are so far above MarketBeat’s reported consensus that it doesn’t matter. Accounting for the effect, adjusted EPS outpaced the consensus by 19 cents, and earnings strength is expected to continue. 

The sticking point in early September is that revenue guidance was increased to a range above the consensus estimate, while the EPS target wasn’t.

The company forecasted $5.32 to $5.72 in adjusted earnings, including the expected but not yet felt impact of tariffs, giving a mid-point of $5.52 compared to the much higher $6.42 consensus reported by MarketBeat.

The critical detail is that the company forecasts growth in its continuing operations and sufficient cash flow to sustain the capital return and balance sheet health. Balance sheet highlights include low leverage and ample liquidity following the split from Family Dollar.

Analysts Trends Support Dollar Tree: Forecast a Move to $130

The analyst trends are mixed but generally supportive of Dollar Tree’s stock price.

Although the market had moved ahead of the consensus price target in late August, it is trending higher due to revisions and signals solid support near the $100 level.

More importantly, the revision trend is leading to a high-end range near $130, which suggests a 30% upside for this stock.

The institutions are likewise bullish.

They provide strong market support, owning approximately 98% of the stock, and the group buys on balance every quarter in 2025, including the first half of Q3. 

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The article "Dollar Tree Plunges Into Buy-Zone: A Robust Rebound Is Expected" first appeared on MarketBeat.