Why Dollar Tree Stock Is Up By 16% Today

Vladimir Zernov
Published: Sep 29, 2021, 15:28 UTC

The stock is trying to settle above the $100 level.

Dollar Tree

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Dollar Tree Shares Rally After Company Increases Its Stock Buyback Program

Shares of Dollar Tree gained strong upside momentum after the company announced that it increased its share repurchase authorization by $1.05 billion to an aggregate amount of $2.5 billion.

This is a major development for the stock which was down by 20% year-to-date before today’s trading session. The company stated: “[…] with the meaningful free cash flow from our business, we expect to maintain share repuchasing as an important part of our capital allocation strategy”.

Previously, Dollar Tree announced that it would begin adding new price points above $1 across all Dollar Tree Plus stores. It will also start to test price points above $1 in some legacy Dollar Tree stores.

What’s Next For Dollar Tree Stock?

Analysts expect that Dollar Tree will report earnings of $5.57 per share in the current year and $6.33 per share in the next year. Earnings estimates continued to move lower after the release of the company’s quarterly report at the end of August, which served as an additional bearish catalyst for the stock.

However, the market will now focus on the expansion of the stock buyback program and the company’s decision to introduce higher price points to its stores. The decision to set some prices above $1 is natural given the constant decline in the purchasing power of $1 and the recent increase in inflation.

It remains to be seen whether analysts will rush to change their estimates or wait for additional data on the performance of the company’s stores, but some traders have already made their bullish bets. At current prices, Dollar Tree will be able to buy about 25 million of its shares, which is a significant amount for a company which has 225 million shares outstanding and whose daily trading volume is less than 3 million. This is a significant development, and the stock has a chance to settle above the $100 level.

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About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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