Five Below stock forecast as the recovery stalls

Five Below is an American discount retailer that sells trendy items that mostly focus on teens and tweens. Most of its products sell for $5 or below, which is reflected in its name. Over the years, the company has grown its footprint to 1,749 stores in the US, a trend that is continuing. 

Five Below makes most of its money in its retail stores and some of it in its e-commerce platforms. The company prides itself for having a wide assortment of products that are specifically targeted at young people.

Five Below’s business has done well over time as its annual sales have moved from over $1.8 billion in 2019 to over $3.5 billion. It expects that this growth trajectory will continue in the coming years, helped by its store openings in the country and brand awareness.

The challenge, however, is that Five Below and other discount store companies have seen their stocks plunge this year. Five Below is down by 50% this year, bringing its market cap to over $5 billion. Other similar companies like Dollar General and Dollar Tree have also fallen, making them some of the worst-performing players in the S&P 500 index.

Five Below stock was trading at $105, while the positive HypeIndex metric rose to 173%.

Learn more about the FIVE stock here.

Positive hype

• Five Below positive hype has risen because of the recent stock rebound as it jumped by over 60% from its lowest level this year. This recovery happened as investors bought the dip.

• The company released modestly strong financial results as its revenue rose by 14.6% to over $837 million. Comparable sales rose by 0.6% during the quarter.

• Five Below has continued to add more stores, which will help it become a bigger and more profitable firm in the future. 

• Analysts expect that Five Below’s business will continue thriving. The average revenue estimate for the current quarter is $1.37 billion, bringing the annual revenue to over $3.86 billion. Its revenue for the next financial year will be $4.25 billion.

• Most analysts are upbeat about Five Below, which they expect that the stock will rise to $122, up from the current $105. 

• The view among most analysts is that Five Below is a strong brand that has room to grow in the future. 

Negative hype

• There are concerns that the company is severely overvalued considering that its revenue growth is not all that strong. It has a price-to-earnings ratio of 21, higher than the sector median of 19.

• The company has a cost issue as many states continue hiking their minimum wages. This means that its profit margins will be thin for a while. 

• Five Below faces a lot of competition from other mainstream brands like Amazon and Walmart that are seeing strong growth.

• Five Below stock remains 52% below its highest level in 2023.

Five Below stock analysis

The daily chart shows that the FIVE share price has crawled back in the past few months. On the positive side, it has moved above the 50-day and 100-day moving averages, which are attempting to have a bullish crossover. Such a crossing would be a positive thing for the stock, which would push it to the next key resistance at $144.85.

On the other hand, it has formed a bearish flag chart pattern, which is shown in orange. This pattern often leads to a strong breakdown. If this happens, there is a risk that it will drop to $79.45, its lowest level on November 20th. 

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The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.