Dollar Tree Inc. (NASDAQ:DLTR) has been wildly volatile. Three weeks ago, the stock crashed by 19.77%. A week after that, the stock gained 29.03%. The net effect is that investors ended up about 10% richer. This week, the stock has lost 2.42%. Analysts think the growth stock is a strong buy.

The volatility is a reflection of the market’s reaction to the earnings performance of the retail sector. After initial earnings indicated reducing incomes against growth in revenues, many retail stocks crashed. The market then got a better understanding of how inflation affects revenues and costs for the retailers. When Dollar Tree reported growth in sales and earnings, retail market fears were allayed.

The ongoing market support for Dollar Tree comes from projected earnings growth. The company is projected to grow EPS by more than 15%. In the latest earnings release, the company gave positive guidance supporting this view. The macroeconomic and industry environment point to the possibility of strong growth.

Dollar Tree is generally bullish

Our analysis shows that the volatility of the last three weeks put Dollar Tree back to its bullish trend. The stock may establish support at $160 and pivot from this level to find a new target at $180. The stock would, however, need to break through the resistance at $170. General market movements will be critical in how the stock performs from the current level.

Summary

Dollar Tree is a recommended buy at the price of $160. The stock is moving to establish support at this level. It is likely to appreciate towards the price target of $180.

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