JPMorgan cuts Ollie’s Bargain Outlet stock target to $85 from $88

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On Wednesday, JPMorgan adjusted its price target for Ollie’s Bargain Outlet (NASDAQ:OLLI), a discount retail chain, reducing it to $85.00 from the stock previous target of $88.00. The firm maintained a Neutral rating on the stock.

The adjustment follows the company’s fourth-quarter earnings report, where Ollie’s reported an adjusted earnings per share (EPS) of $1.23, surpassing the consensus estimate of $1.16.

The retailer’s performance was buoyed by a 3.9% increase in same-store sales, exceeding the expected 3.5%. This marks Ollie’s seventh consecutive quarter of positive comparable store sales.

Moreover, the company’s gross margin expanded by 290 basis points, reaching 40.5%, which was above the anticipated 39.5%. Still, this was partially offset by a selling, general, and administrative (SG&A) expense rate of 24.1%, compared to the expected 23.7%.

Ollie’s Bargain Outlet’s second half of 2023 displayed a compound annual growth rate (CAGR) of 1.3% relative to 2019, aligning closely with the first half’s 1.4% performance. This consistency is in line with the company’s historical pre-pandemic growth pattern of 1-2%.

The company’s chief executive officer, John Swygert, characterized the fiscal year 2023 as a period of return to the robust financial performance and consistent execution that Ollie’s is known for.

Despite the positive elements in the quarterly report, JPMorgan’s price target reflects a cautious stance on the stock’s valuation. The maintained Neutral rating suggests that while the company’s recent performance has been strong, the firm advises a wait-and-see approach for potential investors.

The new stock price target of $85.00 provides a reference for the market on the value JPMorgan currently assigns to Ollie’s shares.

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