BMO Capital Markets downgraded shares of Dollar General to “Market Perform” from “Outperform” and said the discount chain had fully priced in recession expectations. “We believe valuation is close to highs on recessionary comps,” analyst Kelly Bania wrote in a note Monday. “Despite our belief that DG’s execution remains strong and our expectation of comps accelerating as DG benefits from a more price-sensitive environment, we believe this strong outlook is accurately reflected in equities at this time,” added Bania. Investors flocked to Dollar General this year as they watched rising inflationary pressures that would spur consumers to switch to discounters. The Dollar Store is up 7% year-to-date and is 3% below its 52-week high, outperforming the S&P 500 and the other major averages. Still, the analyst set a price target of $265 for Dollar General, up just 4.6% from Friday’s close of $253.30. The analyst sees “modest risks” ahead that make it difficult to be more bullish on Dollar General. Bania said the recent fall in gas prices and an “extremely pro-sale” retail environment could “limit the extent of the trade-down benefiting DG compared to expectations”. “[Given] Due to the significant outperformance and potentially high expectations, we see a more balanced risk/reward in DG shares at this point and would look for a better re-entry point,” the release said. The analyst expects there to be more upside potential at competitor Dollar Tree. CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2022/08/15/bmo-downgrades-dollar-general-says-discount-chain-has-fully-priced-in-recession-fears.html BMO downgrades Dollar General, saying the discount chain has fully priced in recession fears
