Jim Cramer issued a strong buy call on Five Below after the discount retailer's stock fell 1.3 percent Thursday despite beating fiscal second-quarter estimates and raising full-year guidance.
"The stock deserved to jump nearly 7 percent and it's insane that those gains evaporated," Cramer said, urging investors to "buy, buy, buy."
Five Below reported 14.1 percent comparable sales growth for the quarter, besting Wall Street expectations. Investors fixated on deceleration from the prior quarter's 22.7 percent increase and the company's full-year comp guidance suggesting further slowing. Cramer dismissed that concern as the "law of large numbers." "I don't know how anyone looks at that and sees it as a sign of weakness," he said.
Under CEO Winnie Park, Five Below has beaten earnings in all six quarters. The company raised its full-year comparable sales forecast to 10-12 percent from 6-8 percent and lifted adjusted EPS guidance to $9.83-$10.31 per share from prior levels. The midpoint implies over 50 percent earnings growth year-over-year.
The stock now trades at roughly 24 times the midpoint of the new EPS forecast, down from 27.5 times before earnings. Cramer called that "an incredibly fair price to pay."
Cramer attributed the muted reaction to external concerns—higher oil prices and consumer spending worries—overshadowing Five Below's operational strength. "Wall Street is quibbling over an objectively great set of numbers," he said.
