Five Below, Inc. (NASDAQ:FIVE) is making a late comeback after remaining subdued this year. With a gain of 33% in the last six months, the stock has erased most of this year’s losses. The stock has lost 22% year-to-date.
Five Below is a chain of speciality discount retail stores. Despite discount retailers reaping big from consumer budget shopping, supply constraints hit the company. However, Five Below has been poised for growth owing to its continued store expansion. Analysts say higher price points and a niche market are key to its growth. The management has embarked on share buybacks this year, potentially signalling a belief it is undervalued.
The positive prospects of Five Below have taken little time to get noticed, especially in the year’s second half. Investors are optimistic about a turnaround as the company prepares to release its third-quarter results on November 30. The company is expected to have a marginal top-line increase in revenue to $611.2 million or £5.05 million in the quarter. The revenue will be 0.6% higher than the prior year.
However, the earnings per share are expected to fall to $0.14 compared to $0.43 last year. Rising freight charges, marketing expenses, and higher wages are the highlight of the lower earnings.
The reaction of Five Below ahead of the earnings offer some positive expectations. A key breakout could propel the stock higher on strong earnings.
On the weekly chart, FIVE overcame resistance at $150 and is now pushing higher at $161. The stock has also risen above the moving averages. A potential 20-day MA crossover above the 50-day MA is likely as the gap between them closes.
The MACD indicator has moved into bullish territory and shows increasing momentum for the stock.
This article finds it worth investing in Five Below ahead of the quarter results. However, buy preferably on a slight retracement towards $150. Investors should monitor the quarter results and ascertain the journey to the next resistance at $184.
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