Hedge Fund Wants Dollar Tree (DLTR, $92.89) to Break the $1 Price Ceiling
Jeffrey Smith, CEO of activist hedge fund Starboard Value, wants Dollar Tree Inc. to lift its $1 price ceiling on products.
Smith wrote to Dollar Tree CEO Gary Philbin Monday to reveal that his fund had invested in 1.7% stake in the discount retail company, while indicating that there should be more room to raise product prices at Dollar Tree stores. "Dollar Tree has kept its prices at $1.00 since its founding thirty years ago, despite the fact that $1.00 in 1986 is worth approximately $2.30 today, due to inflation," Smith wrote. Smith feels that by rigidly restricting prices within $1, Dollar Tree could potentially be sacrificing product quality or size.
"Dollar Tree has a great customer base, and we believe its loyalty stems from the fantastic value customers find at Dollar Tree, not merely because everything in the store is the same price," Smith added in the note.
Starboard also wants Dollar Tree to consider selling Family Dollar, a chain of stores that it bought in 2015. Starboard has also planned to nominate seven directors for Dollar Tree's board at next shareholder meeting. The hedge fund hopes to work on strategic changes with Dollar Tree’s existing management team.
Dollar Tree appreciated Smith’s suggestions, and responded, "Dollar Tree is focused on ensuring our brands are the premier shopping destination for value and convenience, taking the right actions to solidify our leadership position in value retail". The company has already added four new independent directors since May 2016.
DLTR's RSI Indicator stays in oversold zone for 1 day
It is expected that a price bounce should occur soon.
Technical Analysis (Indicators)
Bullish Trend Analysis
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 8 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where DLTR advanced for three days, in of 309 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on April 11, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on DLTR as a result. In of 72 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for DLTR turned negative on April 12, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 37 similar instances when the indicator turned negative. In of the 37 cases the stock turned lower in the days that followed. This puts the odds of success at .
The 10-day moving average for DLTR crossed bearishly below the 50-day moving average on March 19, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 15 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where DLTR declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
Fundamental Analysis (Ratings)
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. DLTR’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. DLTR’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 50, placing this stock worse than average.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (3.627) is normal, around the industry mean (10.198). DLTR's P/E Ratio (0.000) is considerably lower than the industry average of (23.561). Projected Growth (PEG Ratio) (2.078) is also within normal values, averaging (2.869). DLTR has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.024). P/S Ratio (0.873) is also within normal values, averaging (1.202).
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
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General Information
an operator of discount variety stores
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