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Up 100% From My Buy Call, Five Below Is Now A Sell

Jun. 01, 2020 3:48 AM ETFive Below, Inc. (FIVE)1 Comment


  • FIVE has doubled off my buy call from two months ago.
  • However, the rebound is much more uncertain since March, and the stock is pricing in too much.
  • At over $100, Five Below should be sold.

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I’ve been quite bullish on specialty retailer Five Below (NASDAQ:FIVE) in the past. In the past couple of years, however, the valuation reached levels I didn’t see as reasonable, and my bullishness faded for that reason. Back in March, I recommended Five Below as a strong buy once more as the stock had fallen to $53, and I saw terrific long-term value at that price. Fast forward two months or so, and the stock has doubled. Given this, I think Five Below is back to being overvalued, and I think those among us that were fortunate enough to catch a double in the stock should take the proceeds.

The rebound looks somewhat uncertain

What has become clear in the past two months is that the rebound is going to be slow. Back in March, I personally thought we’d see a short shutdown, followed by a rather speedy return to normal. Obviously, that hasn’t worked out, and it has become clear that any sense of normalcy for our economy is a very long way off. That’s problematic for restaurants, movie theaters, and retailers that require foot traffic, among a host of others. Five Below needs traffic to generate revenue, so I’m much more concerned now than I was two months ago about its ability to come back the way it was before COVID-19.

Today, estimates for comparable sales show a 12% loss this year, followed by a 12% gain next year. Netting the two out implies that fiscal 2022 sales will be slightly below that of fiscal 2020, but it is close enough to say that Five Below should be back on some sort of normal track by next fiscal year.

Source: TIKR.com

However, keep in mind that also implies that there will be a string of three years where

This article was written by

Josh Arnold profile picture
Leader of Timely Trader
Maximize your gains through live trading with alerts ahead of market trends

I've been covering financial markets for ten years, using a combination of technical and fundamental analysis to identify potential winners (and losers) early, particularly when it comes to growth stocks.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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