Last Update 04 Jan 26

Fair value Increased 14%

FIVE: Raised Guidance And Expansion Will Support Future Margin And Traffic Upside

Analysts have raised their price target on Five Below by $23 to $186, citing improving expectations for revenue growth, profit margins, and overall fair value.

Analyst Commentary

Recent commentary from JPMorgan highlights a constructive shift in sentiment around Five Below, with the firm upgrading the stock to Overweight and setting a $186 price target. The move reflects growing confidence in the company’s ability to reaccelerate growth and expand profitability while maintaining a disciplined capital allocation strategy.

Bullish Takeaways

Bullish analysts see the higher price target as supported by an improved revenue growth outlook, driven by new store openings and stronger same store sales trends.
Expectations for margin expansion are rising as analysts anticipate better cost control, more efficient supply chain execution, and improved product mix supporting operating leverage.
Valuation is viewed as attractive relative to the company’s long term growth algorithm, with room for multiple expansion if management delivers on execution milestones.
Analysts point to a resilient, value focused customer base that could help sustain traffic and mitigate macro volatility, reinforcing confidence in the long term earnings power.

Bearish Takeaways

Bearish analysts remain cautious that the upgraded valuation embeds ambitious expectations for traffic and ticket growth, which could leave limited margin for execution missteps.
Concerns persist around potential pressure from a weaker consumer environment, which could weigh on discretionary categories and slow the pace of comp acceleration.
There is ongoing scrutiny of store level productivity for new locations, with some analysts warning that underperforming cohorts could challenge the growth narrative.
Execution risks around inventory management and seasonal assortment remain a focus, as misalignments could compress margins and undermine the upgraded outlook.

What's in the News

Raised full year fiscal 2025 guidance, now expecting net sales of $4.62 billion to $4.65 billion, comparable sales growth of approximately 9.4% to 10.1%, and net income of $306 million to $316 million. (Company guidance)
Issued fourth quarter fiscal 2025 outlook calling for net sales between $1.58 billion and $1.61 billion, with approximately 6% to 8% comparable sales growth and diluted EPS of $3.34 to $3.52. (Company guidance)
Announced expansion into the Pacific Northwest with eight new stores opening across Washington and Oregon, marking the retailer's first entry into the region. (Business expansion announcement)
Updated share repurchase activity, confirming completion of 449,324 shares repurchased for $69.46 million under the November 29, 2023 buyback authorization, with no additional shares bought between August 3 and November 1, 2025. (Buyback update)

Valuation Changes

Fair Value Estimate has risen meaningfully from approximately $163.14 to $186.24 per share, reflecting a higher assessed intrinsic value.
Discount Rate has edged down slightly from about 8.84% to 8.81%, implying a modestly lower perceived risk profile.
Revenue Growth assumption has increased slightly from roughly 10.28% to 10.60%, indicating a marginally stronger long term topline outlook.
Net Profit Margin forecast has improved from around 6.35% to 6.87%, signaling expectations for better profitability and operating efficiency.
Future P/E multiple is essentially unchanged, moving fractionally from 32.08x to 32.06x, suggesting stable valuation expectations relative to earnings.

Focus on value-driven products, operational simplification, and efficient inventory supports margin expansion and broad-based sales growth amid economic pressures.
Strategic targeting of younger demographics and disciplined store expansion strengthen long-term growth prospects and resilience against external shocks.
Tariffs, rising labor costs, heavy reliance on imports, aggressive expansion, and growing competition threaten both margins and long-term revenue prospects.

Catalysts

About Five Below

Operates as a specialty value retailer in the United States.What are the underlying business or industry changes driving this perspective?

Five Below's commitment to providing extreme value and trend-right products at low price points is driving broad-based transaction growth, especially as consumers across demographics become increasingly value-focused due to persistent economic pressures. This is expanding the store traffic and addressable market, supporting higher revenue and potential sustained comp sales growth.
The company is seeing strong momentum from new and retained younger customers, leveraging social media-driven marketing and relevant assortments, which aligns with generational population growth trends and positions Five Below to capture ongoing demand from Gen Z and younger demographics, underpinning a secular foundation for long-term revenue growth.
Operational simplification strategies-including price point rationalization, SKU rationalization, and improved inventory flow-are driving in-store efficiency, higher conversion, better in-stocks, and lower operational complexity. This should enhance future SG&A leverage and support net margin expansion as store-level productivity improves.
Five Below continues to invest in supply chain agility and inventory positioning, enabling it to weather tariff volatility and global sourcing risks, while also diversifying its vendor and country base. These measures are likely to mitigate margin compression from external shocks and support more stable earnings growth in the longer term.
Ongoing disciplined store expansion, supported by robust new store productivity and a data-driven approach to market selection (particularly in new suburban and secondary markets), ensures a large growth runway in white-space markets. This underpins the potential for consistent, long-term revenue and earnings growth as Five Below moves toward its 3,500+ store target.

Five Below Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Five Below's revenue will grow by 10.6% annually over the next 3 years.
Analysts assume that profit margins will shrink from 6.5% today to 6.2% in 3 years time.
Analysts expect earnings to reach $352.1 million (and earnings per share of $6.43) by about September 2028, up from $273.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $313.7 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.6x on those 2028 earnings, up from 28.9x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.7x.
Analysts expect the number of shares outstanding to grow by 0.26% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.79%, as per the Simply Wall St company report.

Five Below Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Five Below faces significant gross margin pressure due to continued tariff-related costs, with recent quarters and future guidance explicitly highlighting unmitigated tariff headwinds; if tariffs remain elevated or increase, it could further compress margins and negatively impact net earnings and profitability.
The company's aggressive expansion strategy (targeting 150+ new stores annually) may lead to market saturation, potential cannibalization of existing sales, and declining new store productivity over time, which would slow long-term revenue growth and put pressure on comparable store sales.
Persistently rising labor expenses and incentive compensation, evidenced by repeated guidance increases for higher SG&A deleverage, could erode net margins, particularly as Five Below is highly dependent on affordable labor to deliver its value proposition in a competitive labor market.
Five Below remains heavily exposed to imported, low-cost discretionary goods; this reliance makes it vulnerable to global supply chain disruptions, regulatory changes, and shifting consumer perceptions toward sustainability, which could impact inventory availability (hurting revenue) and brand appeal (pressuring long-term growth).
Intensifying competition from dollar stores, big-box retailers, and fast-growing e-commerce platforms threatens Five Below's market share and pricing power; these competitive pressures could drive down average unit retail, compress gross margin further, and cap future revenue and earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $157.105 for Five Below based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $185.0, and the most bearish reporting a price target of just $90.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.7 billion, earnings will come to $352.1 million, and it would be trading on a PE ratio of 31.6x, assuming you use a discount rate of 8.8%.
Given the current share price of $142.96, the analyst price target of $157.11 is 9.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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