We recently published a list of Jim Cramer’s Latest Portfolio: Top 10 Calls Before August. Since Five Below Inc (NASDAQ:FIVE) ranks 10th on the list, it deserves a deeper look.
Earlier this month, Jim Cramer during his program on CNBC talked about the importance of optimism right now and explained why he sees hope for America in the future.
Cramer said that the recent political violence made things look “dark” and “grim.” The CNBC host said this election year has been a “mess, something very much in sync with the tone of the country.”
However, Cramer referred to the recent comments from the CEO of the world’s largest investment manager, and said it seems the end of the world is “not on the table.” Cramer called the executive’s comments a “breath of fresh air” and agreed with the notion that the US economy needs more growth and less business regulation. Cramer said that America has a huge deficit problem but it cannot tax its way out of this.
“But we can grow our way out of it.”
Cramer said we should understand that capitalism is a “force for good, a force for wealth generation, not just for the rich, but for everybody, as long as they invest.”
Jim Cramer urged his viewers to invest in individual stocks.
“I don’t care what you invest in, as long as you invest.”
For this article we watched the latest programs of Jim Cramer and picked 10 stocks he’s talking about. With each stock we have mentioned hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Five Below Inc (NASDAQ:FIVE)
Number of Hedge Fund Investors: 39
Jim Cramer was asked about discount store company Five Below Inc (NASDAQ:FIVE). Here is what he said:
“I’m very mystified by Five Below Inc (NASDAQ:FIVE). I don’t know what happened there… Many operational problems, CEO leaves, they don’t really explain what’s going on.”
Cramer said that the company “rushed” to open stores.
“Until they get their act together I’ve got nothing good to say about them.”
Five Below Inc (NASDAQ:FIVE) is getting negative ratings from Wall Street amid an abrupt CEO departure and profit guidance cut.
Barclays downgraded the stock to Equal Weight recently.
“Ultimately, for the stock, we will need to gain more confidence in the growth story, including FIVE’s ability to return to steady +LSD comps growth and maintain strong units growth,” Barclays wrote.
Five Below Inc (NASDAQ:FIVE) has decreased its second-quarter EPS outlook to $0.53 to $0.56, from $0.57 to $0.69.
Gordon Haskett also downgraded the stock, saying in hindsight the company’s decision to start selling items priced above $5 was wrong.
Five Below Inc (NASDAQ:FIVE) has been seeing a decline in comparable sales. The company recently said sales for the 10 weeks ending July 13 rose 9.5% year over year. But this was mostly due to new store openings. Comparable sales in the period fell 5% year over year, while the company expects a further decline of 6% to 7% in comparable store sales for the second quarter. Five Below Inc (NASDAQ:FIVE) short-term expectations are bleak, to say the least. For the second quarter, the company expects sales between $820 million and $826 million, 8.4% higher than last year’s $759 million but below analysts’ expectations of $839.8 million. Earnings per share are projected at $0.53 to $0.56, down from $0.84 last year and missing analysts’ forecast of $0.65. Net income is expected to be $29.3 million to $30.9 million, short of the anticipated $35.9 million.
In the past Five Below Inc (NASDAQ:FIVE) had outlined targets of expanding its store count to 3,500 locations by the year 2030, compared with 1,605 locations as of the end of Q1. However, this target can see changes soon amid new management and changing business dynamics. It’d take a lot of strategy shifts and time for Five Below Inc (NASDAQ:FIVE) to see positive changes in business. Therefore, the stock might not be the ideal choice for investors.
Artisan Mid Cap Fund stated the following regarding Five Below, Inc. (NASDAQ:FIVE) in its Q2 2024 investor letter:
“We ended our investment campaigns in Five Below, Inc. (NASDAQ:FIVE), Roblox and Pool Corp during the quarter. Five Below is a value-oriented discretionary retailer offering an evolving assortment of trend-right products oriented to kids (tweens/teens). We were encouraged by management’s “triple-double” strategy, aiming to triple Five Below’s number of stores by 2030 and double revenue by 2025, which was supported by its stores’ high returns on invested capital. Unfortunately, financial results have been disappointing over our holding period, and we decided to exit the position.”
Overall, Five Below Inc (NASDAQ:FIVE) ranks 10th on Insider Monkey’s list titled Jim Cramer’s Latest Portfolio: Top 10 Calls Before August. While we acknowledge the potential of Five Below Inc (NASDAQ:FIVE), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FIVE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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