Dollar Tree Posts a Solid Quarter, but Guidance Disappoints; Shares Rich

Our $123 per share valuation of no-moat Dollar Tree should fall by a mid-single-digit percentage (not far from the trading price’s reaction) after it announced third-quarter results. While results were fair (including an 8% revenue uptick that beat our 7% mark), management suggested investments and price moves will weigh on fourth-quarter results. We believe the factors at play are transitory and continue to expect mid-single-digit revenue growth rates against high-single-digit operating margins over the next decade. We suggest investors await a more compelling entry point, as we believe the trading price affords little margin of safety considering an ongoing turnaround.