Goldman Sachs Downgrades Dollar General (DG) Stock

Dollar General Corporation (NYSE:DG) is one of the 10 Unstoppable Stocks to Buy According to Hedge Funds. On June 24, Goldman Sachs downgraded the company’s stock to “Neutral” from “Buy” with a price objective of $116, an increase from the prior target of $115. The firm cited valuation for this downgrade following a robust recovery in Dollar General Corporation (NYSE:DG)’s stock. Also, the firm believes that a significant competitive environment can impact its same-store sales. It highlighted the ongoing investment needs in stores, together with supply chain infrastructure.

A busy shopping aisle filled with discounted items in a retail store.

As per analyst Kate McShane, Dollar General Corporation (NYSE:DG)’s management team worked hard in a bid to improve its positioning via the “Back to Basics” program. This resulted in better comp trends as well as improved margins. While the analyst believes that Dollar General Corporation (NYSE:DG) still has room for margin improvement in the long term, the stock is pricing in its better fundamentals, added Kate McShane.

In Q1 2025, the company’s net sales rose 5.3% to $10.4 billion as compared to $9.9 billion in Q1 2024. This rise was because of positive sales contributions from new stores and growth in same-store sales, partially mitigated by the impact of store closures. For FY 2025, Dollar General Corporation (NYSE:DG) expects net sales growth of ~3.7% – 4.7% as compared to the previous expectation of ~3.4% to 4.4%. Artisan Partners, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:

“Other top performers were Heineken and Dollar General Corporation (NYSE:DG). Discount retailer Dollar General (DG) has contended with several business pressures post the pandemic, including execution issues, rising competition and an increasingly constrained lower income consumer after a period of high inflation. Additionally, labor costs, shrink and markdowns have hurt margins. However, the stock has been experiencing renewed interest amid a broader market rotation to cheaper stocks driven by tariff fears and policy uncertainty, as well as the potential for some of DG’s headwinds to subside. The company is making progress on fixing operational issues, from store standards to supply-chain execution and labor efficiency. Additionally, with inflation stabilizing, there are early signs that customers have adjusted to higher price levels as basket sizes and units are beginning to rise again. Another dynamic is DG’s business model is countercyclical. During tougher economic times, DG typically gets trade-down business from middle-income cohorts, and with the possibility that escalating tariffs could trigger a recession, investors see DG as a potential beneficiary.”

While we acknowledge the potential of DG to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than DG and that has 100x upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.