Morgan Stanley Turns Bullish on Discount Retail Stock

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The analyst in question upgraded DG to “overweight” from “equal weight”

Dollar General Corp. (NYSE:DG) is attracting positive analyst attention this morning, with Morgan Stanley upgrading the stock to “overweight” from “equal weight,” and hiking its price target to $250 from $225. The analyst said the company is a quality, defensive retailer with offensive characteristics, and that the potential rewards outweigh the risks as a recession becomes more likely. At last check, DG is up 0.3% to trade at $233.10.

This bullish sentiment is in line with the brokerage bunch’s majority. Coming into today, eight of the 13 analysts in question called Dollar General stock a “strong buy”, while five said “hold” or worse. Plus, the 12-month consensus of $249.50 is an 8.5% premium to its current perch.

On the charts, the shares hit an April 21, all-time high of $262.10, before pulling back to a May 20, one-year low of $183.42. The security has since toppled resistance from its 80-day moving average once again, with a new floor seemingly forming at the $228 region. Year-over-year, DG is up roughly 9%.

Though calls still outnumber puts on an overall basis, a further unwinding of pessimism could put additional wind at Dollar General stock’s back. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 50-day put/call volume ratio that stands higher than 92% of readings from the last year. In other words, long puts are getting picked up at a quicker-than-usual clip.