Why Five Below Stock Popped by 8% on Tuesday

Any time an analyst cranks their price target on a stock more than 50% higher, you can bet the market will stand up and take notice.

That's what happened on Tuesday, with retail stock Five Below (NASDAQ: FIVE). On such a move by a pundit, investors lapped up the stock to send it to a more than 8% price gain at market close. That made it look good even next to the sprightly S&P 500 index (SNPINDEX: ^GSPC), which gained a bit over 2%.

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Getting 50% more optimistic

Before market open, Citigroup's Paul Lejuez raised his Five Below price target. Actually, it might be more accurate to use a verb like "catapulted." The pundit's new fair-value assessment of the retailer places it at $121 per share, well up from his former level of $80. Despite the fairly drastic move, Lejuez maintained his neutral recommendation on the stock.

Image source: Getty Images.

According to reports, Lejuez cited the company's recently released first-quarter earnings pre-announcement as a chief reason for his move. This indicated that Five Below's comparable sales rose nearly 7% year over year in its first quarter, which would be far ahead of the company's guidance for the period of flat to only 2% growth. However, although Lejuez feels that management will raise its "comps' guidance for the full year due to the expected first-quarter result, he feels its earnings outlook will be unchanged due to the current tariffs.

A rise from Below

Five Below's recently raised revenue guidance and that, combined with the anticipated comparable-sales result for the first quarter, would make me more bullish than the Citigroup analyst. I also think the tariff war will sputter out, and as a result, energize the U.S. retail consumer. Therefore, this stock is definitely looking like a buy to me these days.

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Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.