Dollar General’s Turnaround Could Send the Stock Higher in 2026

Core Viewpoint - Dollar General is experiencing a turnaround with positive analyst sentiment, leading to price target increases and upgrades, including a notable upgrade from JPMorgan Chase & Company to Overweight with a target of $166 [1]. Analyst Trends - Strong analyst trends are evident, with increased coverage, firming sentiment, and an uptrending consensus price target forecasting a 25% upside at the high end [2]. Market Drivers - Dollar General is expected to benefit from favorable conditions in 2025 and 2026, driven by a combination of employed Americans, middle-income shoppers seeking value, and high-income earners trading down, which will enhance store activity and revenue growth [3]. Financial Outlook - The company is showing improving fundamentals, leading to stronger free cash flow after dividends, potentially allowing for its first dividend hike in years, with current payouts at 35% of earnings outlook [4]. Balance Sheet Health - Dollar General's balance sheet is robust, with increased cash, stable inventory, flat assets, and reduced debt and total liabilities, alongside an 11% year-over-year increase in equity for the quarter [5]. Institutional Interest - Institutional investors are favoring Dollar General due to its dividend, cash flow outlook, and capital return, with over 90% of the stock owned by institutions, indicating strong support [6]. Performance Metrics - The company has outperformed expectations on both revenue and earnings, with a 2.5% increase in traffic and improvements in gross and operating margins anticipated to continue [7]. Stock Market Activity - Dollar General's stock has shown a bullish reversal, with a significant breakout in December, closing above key resistance levels, and is projected to continue advancing towards the $160 level in early 2026 [8]. Growth Catalysts - Future growth is supported by aggressive plans to increase store counts, targeting 450 new stores in the U.S. and 10 in Mexico, along with 2,000 remodels, although the speed and cost of achieving these goals remain questions [9].