Why Five Below Stock Got Socked Today
The company was hit with a recommendation downgrade.
This downgrade happened despite management's recent raising of first-quarter guidance.
10 stocks we like better than Five Below ›
Teen- and "tween"-focused discount retailer Five Below (NASDAQ: FIVE) saw its stock head south on Friday after a researcher downgraded its recommendation on the company. While this didn't exactly tank the stock, it did leave it with a 2.5% decline on the last trading session of the week. By contrast, the benchmark S&P 500 index suffered only a mild fall with a 0.4% slide on the day.
That researcher, CFRA, changed its recommendation to hold from buy, tagging Five Below with a price target of $108.
Neither the details of the change nor the reasoning behind it were immediately apparent. It came less than two weeks before Five Below is slated to release its first quarter of fiscal 2026 earnings.
As a group, analysts tracking the company are still expecting it to show some solid growth for the period. They are collectively modeling a 19% year-over-year improvement in sales to $966 million and believe per-share earnings will pop by 38% to $0.83.
At least some of this optimism stems from the company's guidance raise in early May. It significantly lifted its own estimate for Q1 sales to roughly $967 million (essentially in line with that analyst consensus) from the previous forecast of $905 million to $925 million. That's on a foundation of anticipated same-store sales growth of 6.7%, well up from the former projection of flat to 2%.
Five Below didn't outline its reasons for the rather strong increases in guidance items, so when that earnings report is published, it should be at least somewhat enlightening. Regardless, the tariff war isn't quite as nasty as some feared it would be, and consequently, the impact on our economy shouldn't be too negative. It might just be time to snap up shares of a retailer like Five Below.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.
Why Five Below Stock Got Socked Today was originally published by The Motley Fool
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