Our View of Dollar Tree's Quarter Is Rosier Than the Market's, but the Shares Are Still No Bargain

Our $127 fair value estimate for no-moat Dollar Tree should fall by a mid-single-digit percentage considering our more sanguine take on the company's second-quarter results and diminished second-half expectations than the stock price’s high-single-digit swoon on Aug. 25. We suspect the difference reflects that the market had been assuming a high degree of execution in the chain’s early-stage turnaround efforts under a reconstituted board of directors and executive suite. We still suggest investors await a more attractive entry point. Our long-term mid-single-digit yearly top-line growth and high-single-digit operating margin forecasts are intact.