Five Below, Inc. (FIVE:NASDAQ)
Price at Preparation: $140.03 (May 13th, 2024)
What they do
Five Below, Inc. (FIVE:NASDAQ) operates as a specialty value retailer offering merchandise targeted at the tween and teen demographic. Its assortment of products, including select brands and licensed merchandise. It is engaged in offering a group of products, including leisure, fashion and home, and snack and seasonal. Leisure includes items such as sporting goods, games, toys, tech, books, electronic accessories, arts and crafts, and party. Fashion and home include items such as personal accessories, attitude t-shirts, beauty offerings, home goods and storage options. Snack and seasonal include items such as seasonal goods, greeting cards, candy and other snacks, and beverages. Five Below, Inc. also offers an e-commerce portal through the fivebelow.com Website, offering home delivery and the option to buy online and pick up in store. It also sells its merchandise through on-demand third-party delivery services to enable its customers to shop online and receive convenient delivery.
Each week at Theta Bandits, we strive to bring you free content that is looking at current market conditions to spot a new potential winner for the portfolio. This week we have turned our attention to another stock in the weakened retail sector, looking to prepare to take advantage on a recovery – grab your notepad!
Opinion
Five Below, Inc. (FIVE:NASDAQ) has traded a very wide range in the last 52-week period and coming off highs in January, 2024 of $216.18 USD down to yesterday’s low of $139.16 USD, a whopping 35% drop. This started due to their last Earning’s Report (ER) and has been echoed with other retail stocks. Usually the “Dollar store” type retailers are regarded as defensive stocks, and Five Below, Inc. would fit into that category. With that in mind, this stock could have the potential to have an earlier recovery than some other retail sector stocks. From their current price, the 12-month Price Targets (PT) estimate an average upside of +48.21% at $207.54 USD, with a low of +21.4% at $170.00 USD and a high of +74.96% at $245.00 USD – This potential represents a great return in anyone’s view.
This stock does not offer dividends; therefore, all potential gains will need to be made through price appreciation. Usually, stocks that offer dividends are less volatile, which does not apply here and could lead to potential high volatility. As with any stock, the market is never a “sure thing” – one must adjust one’s strategy to fit their personal risk profile.
Plan
Using the visual aid below, we show a few highlights: In blue – the 52-week high. In red – the 52-week low. In green – the 12-month PTs (low, avg, high). In yellow – our potential plan
Since the stock price has dropped below a support that was hit in October, 2023 to give us the 52-week low, this shows a little weakness and we could start to leg into the stock with a small position, but crossing above the support/resistance at $145.72 USD and holding would serve as confirmation to add more to the position. This way if the stock is not at the bottom given their next ER is on June 5th, 2024, the potential loss is minimized.
Once confirmed the price is moving to the upside with the resistance above, marked on the visual aid are three targets at $170.00 USD (low PT), $192.29 USD and $207.54 (avg PT). These all represent support/resistance lines that have had significant price action previously. If you have not exited the position entirely and are working with profit – the bonus target of $245.00 USD is highlighted. At support/resistance lines remember to secure profit or raise stop loss triggers to mitigate the risk of a trade going wrong.
For more content consider our Theta Bandits Discord community, a hub for traders to ask questions, share ideas and strategies like the approach above for this and various other tickers daily. Traders in this community could have attacked this very same position using other methods discussed in previous Top Pick Tuesdays.
RISKS
It is important to both secure profit and limit losses as discussed above. Make sure to plan your trade with-in your risk tolerance and give the trade the time required to be successful, while setting and updating limits to mitigate risk and setting exit points for your position.
This week’s edition is a wrap – drop us a comment in the discord. We read them all!
Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.
