Ross Stores gains after UBS turns bullish

What happened

UBS upgraded Ross Stores to a Buy rating from Hold and set a $315 price target. UBS expects upward profit estimate revisions as same-store sales growth continues. Ross Stores shares traded at $237.14 on Monday morning.

Confirmed

Global impact / market context

An upgrade can pull more investor money into the stock because a large brokerage now expects stronger profit and sales growth. UBS expects Ross Stores to close its store productivity gap with TJX, which means each store could generate more sales.

Analyst inference

UBS sees Ross Stores growing revenue at about an 8.5% compound annual rate over the next two years, which means yearly growth stacked together, above the consensus expectation. The $315 target sits well above the $237.14 trading price, signaling sizable expected upside.

Analyst inference

What to watch

1. UBS expects meaningful upward earnings-per-share revisions from the Street, which is analyst profit estimates, as same-store sales momentum extends beyond this year. Confirmed
2. Ross Stores management's new strategies aim to close the store productivity gap with TJX through enhanced merchandising, improved in-store operations, and increased marketing investments. Proposed
3. If Ross Stores narrows the productivity gap, rising sales per store could lift revenue and profit, supporting the higher price target and attracting more investor buying. Analyst inference

Evidence

• seekingalpha.com