The analyst outlines several strong positives FIVE can offer to “growth-oriented investors navigating an uncertain consumer backdrop”:
1. The company’s “Triple Double” strategy of doubling sales and EPS by FY25 remains intact: “Management indicates clearly that while unexpected, pandemic-related disruptions impacted trends in 1H22, underlying progress toward the Triple Double plan is intact, with realization of goals likely only modestly delayed.”
2. Continuous rollout of “Five Beyond” stores, seen as “incremental comp driver”: “250 store conversions completed in 2022 and an estimated 400 set for 2023. Per our math, Five Beyond conversions should lift total company comps 60–110 bps in 2023.”
3. Opportunities for potential market share gains: “ongoing struggles at now bankrupt Party City could ultimately make for
an incremental market share opportunity of upward of $800M in select party-related categories for FIVE.”
4. Compelling valuation at current price levels: “12- to 18-month price target of $235 is predicated upon a mid-20s multiple applied to our newly established FY25 (Jan. 2026) EPS forecast of $9.31, a level that represents a conservatively healthy discount to current trading parameters for shares and reflects continued compelling and outsized growth prospects for FIVE.”
On the sum of factors, the analyst believes “FIVE continues to successfully build out its base of stores, increasingly capitalizing on the woes of less well-positioned operator,” and is “optimistic that the growth premium currently afforded shares will sustain given outsized sales and EPS expansion.”
Oppenheimer reiterates an “Outperform” rating on the stock and raises Price Target to $235.
Shares of FIVE are currently trading around $190, and are up over 10% YTD.
By Vlad Schepkov