Five Below (FIVE) just fell out of the sky on earnings.
Net earnings came in at $64.8 million, or $1.15 a share from 53 cents year over year. Analysts were looking for $1.11. Unfortunately, the company missed on sales of $646.6 million, as compared to expectations for $658 million. Same store sales were up to 39.2%.
For the third quarter, the company sees EPS of between 23 cents and 30 cents a share on sales of $550 million to $565 million. However, with “uncertainty related to COVID-19, potential future shifts in consumer spending, and ongoing global supply chain disruption,” it did not provide full-year guidance.
Despite the bad news, analysts advise using weakness as opportunity.
Jefferies’ analyst Randal Konik for example reiterated a buy rating, with a $300 target. As noted by Street Insider, “The analyst suggested investors Buy the Dip stating, ‘What matters is 1) comps were up big (+21% vs. ’19), 2) new store growth remains high (near mid-teens% YoY), and 3) Q3 outlook appears inline to slightly better.”
Goldman Sachs analyst Kate McShane also reiterated a buy rating with a $236 target. The analyst added, “We continue to like FIVE given its differentiated treasure hunt offering that is resonating well with customers, supporting strong unit growth potential, while the company also seems to be better positioned with respect to freight exposure vs retail peers,” as also noted by Street Insider.
At the moment, FIVE is a falling knife.
If you’re thinking of buying on weakness, wait for FIVE to bottom out first. Also, wait for confirmation that the pullback is over. The last thing you want to do is buy too early.