Should I Buy Dollar Tree (DLTR)? Finance YouTuber Analysis

The analyst recommends avoiding Dollar Tree due to significant headwinds, including declining earnings and return on assets, and management's overly pessimistic view of the current macro environment. He argues that if the company is struggling now, a real recession could be devastating, and despite appearing cheap, earnings are in decline with no clear bottom.

“these are a couple of stocks I'm absolutely avoiding yes they're starting to look like values but keep in mind that those earnings are in Decline Revenue could potentially decline over the next year and that is not where you want to be be in a retailer cuz you don't know where the bottom is”

Dollar Tree is a defensible stock for a recession, catering to budget-conscious consumers. The company has shown strong revenue growth and manageable debt. While free cash flow has been volatile due to post-COVID inventory reinvestment, it is expected to revert higher, offering a strong yield.

“I think that reverts back higher so you're in this six to five five to six percent yield rate when it reverts back and I think that's a strong yield to hold for company during a recession”

The analyst recommends buying Dollar Tree stock for a long-term hold, citing its consistent top-line revenue and EBITDA growth, strong free cash flow generation, and low debt. He projects a 15% internal rate of return (IRR) based on conservative growth assumptions, which is significantly above the market average, making it a strong value play.

“I think this is very interesting play for something that would provide some protection to your portfolio especially if your portfolio consists of a lot of the higher multiple price companies.”

The YouTuber's top pick is Dollar Tree, which saw a 60.8% year-over-year increase in stock during the last recession. He argues that consumers prioritize high-value products for basic consumables when money is tight, leading to packed stores.

“in the last recession Dollar Tree stock was up 60.8% year over year”

The YouTuber advises against Dollar Tree, despite its general strength in a recessionary environment, because it is currently trading at a 52% premium to its five-year price-to-sales ratio, making it expensive.

“The dollar stores are even more expensive at 52% premium for Dollar Tree.”