What Happened?
Shares of discount retailer Five Below (NASDAQ: FIVE) jumped 3.5% in the afternoon session after the stock's positive momentum continued as the company posted strong third-quarter results that surpassed expectations. The discount retailer reported that its net sales for the quarter ended November 1 rose 23.1% to $1.04 billion, marking the second consecutive quarter sales were above the $1 billion mark. This growth was driven by a 14.3% increase in comparable-store sales and the opening of 49 net new locations. The company’s net income also climbed significantly to $36.5 million, or $0.66 per share, up from $1.7 million in the same period a year ago. The positive momentum from the earnings report appeared to overshadow news that a director filed a notice proposing to sell some restricted stock.
The shares closed the day at $181.40, up 2.4% from previous close.
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What Is The Market Telling Us
Five Below’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 1.6% on the news that Truist upgraded the stock to 'Buy,' citing a turning point for the company following a strong quarter. The brokerage firm also raised its price target to $216. This move followed another vote of confidence from Morgan Stanley, which increased its price target on the stock to $190. The wave of positive analyst ratings came after the discount retailer announced impressive third-quarter results. Five Below's revenue jumped by more than 23% compared to the same period in the previous year, driven by a remarkable 14.3% surge in sales at established stores. This performance significantly beat the company's own forecasts. Following the strong quarter, the company also raised its sales guidance for the full year, signaling confidence in its continued growth.
Five Below is up 83.1% since the beginning of the year, and at $181.40 per share, has set a new 52-week high. Investors who bought $1,000 worth of Five Below’s shares 5 years ago would now be looking at an investment worth $1,108.
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