Dollar Tree (NASDAQ:DLTR) stock fell last week after the company's latest earnings report raised concerns for investors. While the company, which operates more than 15,000 discount retail stores in Canada and the U.S., did beat expectations for the second quarter, it's Dollar Tree's guidance that sent its shares down.
For fiscal 2022, it is projecting earnings per share to be between $7.10 and $7.40, versus an earlier forecast between $7.80 and $8.20. The company is looking to be more aggressive on pricing and that will adversely impact its margins in the latter half of the year.
The stock fell more than 17% last week to below $139. Although that's not near its 52-week low of $84.26, it did put the stock into oversold territory with a Relative Strength Index of 21. The sudden drop in price gave back all of the gains the stock had generated up until that point. Down 1.3% year to date, shares of Dollar Tree are still doing better than the S&P 500, which is down by 15%.
Currently, the stock is trading at a forward price-to-earnings multiple of 19, which isn't a terribly cheap valuation, especially given the company's reduction in forecast. Dollar Tree is a promising stock to own amid inflation as consumers will likely be shopping more in the company's dollar stores in order to stretch their budgets. However, given that the stock is under pressure and could continue to fall lower after this bearish news, the best move may be to wait for more of a drop in price before buying shares of Dollar Tree.
