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Shares of
Ollie’s Bargain Outlet
look to be a “coiled spring,” set to pop in the coming quarters, according to Wells Fargo.
Analyst Edward Kelly upgraded shares of the discount retailer to Overweight from Equal Weight. He raised his target for the stock price to $65 from $45.
Shares of Ollie’s (ticker: OLLI ) were up 12% to about $48 in early afternoon trading. The stock is down about 5% year to date, while the Dow Jones Industrial Average has fallen 4%.
“The story has admittedly been ugly, but we expect momentum to turn positive in the coming quarters,” Kelly wrote in a research note Monday. “The close-out buying environment, which we believe has been the company’s biggest sales issue, looks poised to improve.”
Kelly said supply-chain constraints are making it harder for Ollie’s to buy disounted goods to resell, while demand from consumers , which had been boosted by stimulus payments, is fading.
Kelly said Ollie’s could actually thrive in a tough consumer environment, and that the availability of goods via wholesale closeout sales would likely shift in the company’s favor, given that U.S. retail inventories look “suspiciously high.”
“This all provides a compelling set-up in a name with bearish investor sentiment and some of the easiest comparisons in retail,” he said.
Jefferies analysts also seem generally optimistic about the stock. In a research note Monday, analyst Randal Konik reiterated his Buy rating on the stock, but lowered his target for the price to $75 from $85 in light of what he described as the company’s “underwhelming” fourth-quarter and full-year results.
“However, we continue to believe in the long-term story here. With nearly 40 years of closeout buying coupled with a consumer gravitating more and more toward value is a winning formula for OLLI ahead, in our view,” Konik said.
Three of the four analysts tracked by FactSet that cover the stock rate it at Buy or the equivalent. The fourth rating is at Hold.
Write to Logan Moore at logan.moore@barrons.com.
Read More: Stock in Ollie’s Bargain Outlet Could Take Off, Analyst Says.