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Guggenheim says buy Dollar General, a strategic dollar store play in the near term


Guggenheim said investors looking to play the dollar store stocks should consider putting their money in Dollar General — at least in the near term. “Bottom line, we believe DG’s above-average top- and bottom-line momentum should drive outperformance at least through year-end while DLTR’s superior risk/reward profile should serve investors well beginning in early 2023,” wrote analyst John Heinbockel in a note to clients Thursday after both companies posted earnings for the recent quarter. The firm raised its price target on Dollar General to $270 from $250, citing strong top-line growth and gross margin expansion. At the same time, Heinbockel trimmed Guggenheim’s target on Dollar Tree to $170 from $185 a share as it grapples with greater price investments in its Family Dollar stores –which led the company to cut its guidance. That said, Heinbockel believes Dollar Tree’s woes should pass looking ahead and remains a key beneficiary of the current economic outlook. “Taken together, we believe the dollar stores are well positioned, as a channel, to gain share and profitably in a challenging macro backdrop that favors consumables over discretionary purchases,” Heinbockel wrote. Shares of Dollar General and Dollar Tree have risen 4.4% and 6% this year, respectively. The price targets from Guggenheim suggest both stocks have further room to run and could rally 9.7% and 14%, respectively. — CNBC’s Michael Bloom contributed reporting

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