Five Below (FIVE) Gains Pre-Market, Analysts Raise PT on Strong Earnings

Five Below's stock (NASDAQ: FIVE) is moving up in the pre-market, having gained 5.2% on a strong set of earnings and analyst price target changes.

The company's recent performance has been undeniably strong. Q1 2025 results showcased a 19.5% year-over-year increase in total sales, reaching $970.5 million, coupled with a 7.1% rise in comparable sales. Adjusted EPS also saw a significant jump, climbing to $0.86 from $0.60 in the same period last year.

This robust growth has propelled the stock well above its 50-day and 200-day moving averages, currently at $84.30 and $90.04 respectively, indicating a powerful upward trend. Five Below's Q2 2025 guidance further reinforces this positive outlook, projecting EPS between $0.50 and $0.62, surpassing the consensus estimate of $0.58. Revenue guidance of $975 million to $995 million also exceeds analyst expectations of $958.3 million. Furthermore, the full-year 2025 EPS guidance has been revised upwards to a range of $4.25 to $4.72.

Despite this impressive performance, several factors warrant a cautious approach. The stock's P/E ratio of 25.00 suggests a relatively rich valuation, especially when coupled with a PEG ratio of 1.19, indicating that growth might not fully justify the current price. Moreover, the average analyst rating remains a “Hold,” with a consensus price target of $116.16, below the current trading price.

With analysts coming in with revisions en masse, there is likely to be change in this as the day and weeks ahead play out. Wells Fargo raised its price target to $140 while maintaining an “Overweight” rating, citing the company's encouraging Q1 update and renewed focus on customer value.

Craig-Hallum is even more bullish, setting a price target of $150. Telsey also increased their price target to $128, whilst BoFA raised to $93. Morgan Stanley have also raised their price target to $135 from $110, whilst remaining Equal Weight.

The appointment of Winnie Park as the new CEO is a significant development. Analysts expect her expertise in digital marketing and global sourcing to be valuable assets as Five Below seeks to strengthen its online presence and optimize its supply chain. However, any leadership transition introduces a degree of uncertainty, and it remains to be seen how Park's strategies will impact the company's performance.

Bull Case:

• Strong recent financial performance, including robust sales growth and improved EPS.
• Positive Q2 2025 guidance exceeding analyst expectations.
• Successful expansion strategy with new store openings.
• Analyst upgrades and positive sentiment from some firms.
• Appointment of Winnie Park as CEO, bringing expertise in digital marketing and global sourcing.

Bear Case:

• Relatively high valuation (P/E ratio of 25.00).
• Average analyst rating of “Hold” with a consensus price target below the current trading price.
• Potential margin pressures from rising costs and increased competition.
• Uncertainty surrounding leadership transition and the impact of new CEO's strategies.

Looking ahead, Five Below's ability to maintain its current momentum will depend on several key factors. Firstly, the company must continue to execute its expansion strategy effectively, opening new stores while maintaining strong comparable sales growth. Secondly, it needs to navigate potential margin pressures arising from factors such as rising costs and increased competition.