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Bank of America Upgrades Five Below to 'Buy' with $200 Price Target

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  Published in Stocks and Investing on Wednesday, February 4th 2026 at 15:06 GMT by CNBC
      Locales: Pennsylvania, Texas, California, Florida, UNITED STATES

Charlotte, NC - February 4th, 2026 - Bank of America has dramatically shifted its outlook on Five Below (FIVE), issuing a double upgrade of the discount retailer's stock from neutral to buy, and simultaneously raising its price target to $200 from $165. This bullish move, announced today, implies a potential 20% upside for investors and signals growing confidence in the company's future trajectory. The upgrade arrives at a seemingly opportune moment, as Five Below is currently trading near its 52-week low, down approximately 13% year-to-date and experiencing a 3% dip just yesterday.

The catalyst for this renewed optimism appears to be the recent change in leadership and a perceived shift in company strategy. Joel Anderson assumed the role of CEO in late 2025, taking the reins from Joseph C. Ehmann, whose resignation was prompted by rising concerns surrounding inventory management issues and a deceleration in sales growth. Ehmann's tenure, while initially successful in expanding Five Below's footprint, ultimately faced challenges in maintaining consistent profitability and adapting to shifting consumer spending habits.

Bank of America analysts are particularly impressed with Anderson's early initiatives focused on three key areas: margin improvement, stringent expense control, and a more measured approach to new store openings. The previous strategy of rapid expansion, while boosting top-line revenue, reportedly stretched the company's resources and contributed to the inventory imbalances that plagued its performance. Analysts believe Anderson's more disciplined strategy will allow the company to optimize its existing store network and focus on maximizing profitability per square foot.

"We are encouraged by management's focus on margin improvement and expense control, and believe the company is likely to be able to drive efficiencies and improve its profitability over the coming years," the Bank of America report stated. This suggests that the firm anticipates a restructuring of operations, potentially involving streamlining supply chains, renegotiating vendor contracts, and implementing more effective inventory forecasting techniques.

Five Below's business model centers around offering a curated assortment of products priced at $5 and below, appealing to a broad demographic, particularly teens, pre-teens, and families. This value proposition has been a key driver of its past success. However, inflation in recent years has put pressure on the $5 price point, forcing the company to explore opportunities to expand into higher-priced items while still maintaining its core value image. Anderson's leadership will be crucial in navigating this delicate balance.

Analysts expect Anderson to introduce a tiered pricing strategy, potentially expanding the product range to include items priced up to $10 or $15, while ensuring that a significant portion of the inventory remains within the traditional $5 and below range. This could allow Five Below to capitalize on higher-margin opportunities and offset some of the inflationary pressures without alienating its core customer base.

Furthermore, the report highlights the importance of a strategic approach to new store openings. Rather than pursuing aggressive expansion at any cost, Bank of America expects Anderson to prioritize locations with strong demographics and favorable market conditions. This may involve a slower rate of expansion but a higher return on investment for each new store. Data analytics and a more robust site selection process are expected to play a key role in this strategy. The company is also evaluating the potential of smaller-format stores in urban areas to cater to specific local needs.

The double upgrade from Bank of America is likely to attract renewed investor interest in Five Below, potentially driving up the stock price in the short term. However, the long-term success of the turnaround strategy will depend on Anderson's ability to execute his vision and deliver sustainable growth. Investors will be closely watching the company's upcoming earnings reports for evidence of margin improvement, expense control, and a more disciplined approach to store expansion. The retail landscape remains competitive, and Five Below will need to continue innovating and adapting to maintain its position as a leading discount retailer.