Five Below (FIVE) to Benefit from Pokemon Go Craze - UBS

Discount Five Below (NASDAQ: FIVE) is solidly higher Friday (+3.9%) with the broader market and amid positive commented from UBS analyst Michael Lasser. The analyst reiterated a Buy rating and raised his price target on FIVE to $55 from $48, saying the Pokémon trend shows there is always opportunity lurking for FIVE.

Lasser thinks the market still under appreciates how effective FIVE is at having differentiated and trend-right merchandise at compelling values. He said it not about any one particular fad like Silly Bandz, Duct Tape, or Rainbow Looms, as the are always coming and going. He said the Pokémon Go craze is a good example.

"We recently spoke with 25 FIVE locations from various regions to assess the retailer's offerings and demand for these products. Across the sample, 19 stores noted they carry Pokémon cards," Lasser notes. "Importantly, 6 of them were completely sold out of cards, illustrating demand is outpacing supply. In addition to cards, some locations carry other Pokémon products, such as an activity book & a Pokédex toy. Keep in mind Pokémon Go only launched in the U.S. on July 6. Our checks suggest FIVE stores will soon start receiving a broader array of Pokémon products within the month, showing how quickly it can respond to these trends when they materialize. Further, it's used Pokémon branding in its ads to support its traffic. These factors should deliver some near-term momentum."

As results, UBS is raising SSS estimates for 2Q to 4.0%, which is ahead of the 3.4% consensus.

For an analyst ratings summary and ratings history on Five Below click here. For more ratings news on Five Below click here.

Shares of Five Below closed at $48.98 yesterday.

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