In reality, fixed prices could result in stock market price increases. An American chain of inexpensive variety stores with multiple price points called Dollar Tree. The bargain retailer, which is listed on the Nasdaq Composite, does significantly better in the predicament than the aforementioned index. So let’s investigate why the Nasdaq is struggling and what the future holds for Dollar Tree.
The Nasdaq has been performing poorly over the past year or two, declining more than 33% for 2022 so far, along with the rest of the world’s markets.
On the graph, we can observe that the index ended 2021 on a high note and began 2022 with promise as Covid-19’s effects started to fade. Nothing indicated problems as lockdowns were lifted, air traffic resumed its normal path, goods delivery resumed, cafes and restaurants opened.
Sadly, it was always going to be here. One morning, news of a military war between Russia and Ukraine woke us up. The world is currently experiencing an energy crisis, which has the potential to shatter hopes for a better future.
This results in inflation escalating at previously unheard-of rates. The US inflation rate touched a 40-year high of 8.6% in the summer of 2022, and the Fed began gradually raising interest rates to try to deal with the escalation. Each increase in interest rates has an impact on the market.
It could have been worse, though. Many experts think that many US indexes were expensive before Covid struck and that they remain overvalued in many cases today.
In these circumstances, Dollar Tree stock exhibits impressive growth of nearly 40%. You can more easily see the difference on the following graph. The Nasdaq surpasses Dollar Tree by more than 65%.
Inflation is one of the potential causes of such a significant increase. Who would have believed that certain firms would benefit from it. People that aim to spend less money on necessities are friends of fixed prices. Additionally, since people were forced to reduce their spending due to the current scenario, more and more people were going to bargain retailers.
As a result, Dollar Tree makes the most of the attention by expanding its companies and number of locations. Additionally, the approaching holiday season will force the company to hire more staff in order to meet demand. Also important to remember is the Santa Claus rally, which is the stock market’s gift to investors at the end of the year.
However, inflation is much more of a threat than an ally. Fixed prices become significantly less fixed as operating costs rise. Most of the $1 goods from Dollar Tree now cost $1.25 instead of $1.
Soon after, Dollar Tree lowered its anticipated earnings per share.
Globally, analysts expect Dollar Tree stocks to perform well over the next 12 months, with the average target price being around 20% higher than the stock’s present price. However, as you can see, both the advantages and disadvantages of these equities span several pages, so always conduct your own research before deciding whether to purchase, sell, or retain your asset.