Dollar General hasn't proven itself to be a quintessential defensive stock so far this year, according to Morgan Stanley.
Dollar General is not performing as expected given the current backdrop, according to Morgan Stanley. The bank downgraded the discount retailer to equal weight from overweight Sunday and lowered its price target to $180 per share from $235. Morgan Stanley's new forecast implies upside of 8.4% from Friday's close. "While we anticipated some near-term choppiness on macro/low income consumer weakness in Q1, we underestimated the comp shortfall," analyst Simeon Gutman said.
He also said there are questions lingering around new management for the company, "mixed market share trends," a lack of buybacks planned for 2023 and "slowing store growth," among others. Dollar General shares are down more than 32% year to date. A chunk of those losses came Thursday after the discount retailer reported weaker-than-expected earnings and revenue for the first quarter. The stock dropped nearly 20% that day.
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