12:35 PM EDT, 06/28/2024 (MT Newswires) -- Dollar Tree ( DLTR ) is facing an excessively negative market perception that is creating a 6-to-1 upside downside skew, which is "quite compelling," UBS Securities said in a note Friday.

The bank said Dollar Tree's ( DLTR ) shares have weakened due to concerns about its long-term sales and margin potential, rising freight rates, and tariff impacts. Additional challenges include Family Dollar's profitability issues and lease obligations along with uncertainty in Dollar Tree's ( DLTR ) 2024 outlook.

Dollar Tree's ( DLTR ) recent weak performance in Q1 is likely temporary, with ongoing positive sales growth seen from Q2 onwards, according to the note.

UBS said market skepticism regarding Family Dollar's future and Dollar Tree ( DLTR ) banner's prospects has led to undervaluation by the market and the company "could see the biggest comp lift from Family Dollar closures."

The firm reduced its price target on Dollar Tree's ( DLTR ) stock to $155 from $170 and reiterated its buy rating.

Price: 104.44, Change: -0.77, Percent Change: -0.73