2023-11-21 22:36:04
The number of items sold for more than $3 at Dollarama is increasing. (Photo: 123RF)
What to do with titles from Dollarama, Microsoft and Gap? Here are some analyst recommendations likely to move prices soon. Note: the author may have an opinion completely different from that expressed.
Dollarama (DOL, $98.57): encouraging preliminary data
More than three weeks before the unveiling of Dollarama’s quarterly results, Vishal Shreedhar of National Bank Financial notes that his consumers continue to shop there despite the retailer’s price increases.
In fact, the number of items sold for more than $3 is up compared to last May and July. Among its 3,000 different items, the number sold for less than $3 slipped by 23, while the number of those priced over $3 increased by 54.
The analyst nevertheless reports that consumers continue to exercise caution, partly reducing their discretionary spending, according to what he has learned.
Thus, according to him, the growth rate of sales of the same store that Dollarama will unveil on December 13, 2023 will be 10.1%, while it reached 10.8% last year. However, the size of the basket should have increased by 1% during this same period.
The analyst is more cautious than the rest of the consensus, and is betting on revenues of $1.475 billion. Last year, they totaled $1.290 billion. However, it expects earnings before interest, taxes and depreciation of $452 million, which is higher than the $450 million consensus. It’s also more than last year’s $386 million.
It also expects that thanks to its more efficient supply chain, its margin growth rate will increase, and its selling, general and administrative expenses will decrease.
Vishal Shreedhar believes that the company will revise upwards its targets for the financial year, including that of the same-store sales growth rate, being convinced that its sales should remain “solid”. In the first and second quarters, Dollarama far exceeded its target range of 10 to 11%, he recalls.
The analyst maintains his “sector outperformance” recommendation, and his target price of $104. The stock is currently trading at 27.3x expected earnings per share over the next twelve months, whereas over the last five years, on average, this multiple was more around 24.9x.
Microsoft (MSFT, US$369.67): it might emerge as a winner from the Altman affair
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