03:21 PM EDT, 08/21/2024 (MT Newswires) -- Five Below ( FIVE ) is a "growth story" with "ample room for expansion" despite being pressured in the near term, UBS said in a note emailed Wednesday.

The retailer is likely to report fiscal Q2 results in line with estimates, lower its fiscal 2024 outlook and set the stage for a better 2025. The company is facing competition from Temu and grapples with a host of other factors, including its reliance on price to drive sales, but these "challenges are addressable," UBS said.

While Five's recent sales performance failed to maintain the company's strong track record of growth, "we think it is too early to call this a broken story," UBS said as the firm expects the company to "eventually stabilize" driven by "better execution, new trends, or easier comparisons."

UBS added that sentiment on the stock, which had become "too negative," should also improve as a result.

Other catalysts that could improve sentiment on the stock include the eventual appointment of a permanent chief executive and the company adjusting its fiscal 2024 per-share earnings outlook to a level the market deems achievable, according to the note.

UBS said Five could lower its fiscal 2024 EPS guidance to a range of $4.25 to $4.75 from $5 to $5.40 currently.

UBS maintained its buy rating on the stock but slashed its price target to $108 from $120.

Five Below ( FIVE ) shares were up 4.3% in recent Wednesday trading.

Price: 80.70, Change: +3.38, Percent Change: +4.38