11:13 AM EDT, 08/30/2024 (MT Newswires) -- Dollar Tree ( DLTR ) is a "compelling investment opportunity" even though market sentiment around the retailer continues to be negative, UBS said in a note Thursday.

Analysts, including Michael Lasser, said that while there are many uncertainties about the dollar store sector, there are also opportunities. Dollar Tree ( DLTR ) can minimize its issues with Family Dollar and benefit from its multi-price point strategy, which could drive growth over several years. The company is expected to generate good free cash flow and increase capital returns.

The market may not see these positives until estimates stabilize. While the company might struggle this quarter due to slowing sales and increased promotions at Dollar General ( DG ) , the stock could still offer good returns in the long run, the analysts added.

The stock's current price reflects too much risk and is missing some key positive factors including multi-price rollout, Family Dollar exit, and dissipating external headwinds, the analysts said. "So, overall, even if Q2 proves to be another step in downward estimate revisions, we think the combination of these catalysts as well as its compressed valuation makes this stock one of the most compelling investment opportunities in the hardline, broadline, and food retail industries," they added.

UBS has a buy rating and a $155 price target on Dollar Tree ( DLTR ).

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