Deutsche Bank raised its rating for Dollar Tree to buy from hold, citing the improving low-end consumer market and better prospects for profitability in the coming years.
"Macro backdrop supporting sustained momentum in these 'defensive names' as spending prospects of the 'low-end' customer base improves ... supported by higher spending power (i.e. lower gas prices, strong employment gains, etc.) and margin initiatives that outweigh labor costs," Deutsche Bank's Paul Trussell wrote in a note to clients Sunday.
"We see material margin upside to Street consensus and re-rate the company to reflect long-term earnings power."