Remember when everyone wrote off Five Below as just another teen-focused gimmick store that would fade the moment TikTok trends changed?
Yeah, me too. I was one of them. I walked past those bright teal storefronts thinking “cute, but how long can $5 candy and LED lights really carry a public company?” Turns out I was dead wrong — and Wall Street is finally catching up in a big way.
The Upgrade That Turned Heads This Morning
This morning Truist Securities did something pretty rare: they upgraded Five Below to Buy and boosted their price target from $179 all the way to $216. That implies roughly 25% upside from Friday’s close — and the stock is already up more than 65% year-to-date in 2025.
Most analysts would look at a chart like that and say “nice run, time to take profits.” Truist basically said the opposite: the party is just getting started.
Their exact phrase? “Unicorn-like growth.” In a market where that’s obsessed with AI and mega-caps, hearing a 20-year-old discount chain described that way feels almost surreal.
So What Changed?
Everything, apparently.
About eighteen months ago Five Below hit what management called “a wall.” Merchandise felt stale, in-store remodels caused chaos, and comp sales went negative. The stock cratered below $120 and the narrative became “the concept is played out.”
Fast-forward to today and the turnaround has been nothing short of remarkable. Third-quarter results weren’t just a beat — they were a blowout. Traffic, average ticket, and total comparable sales all accelerated dramatically. Suddenly the same investors who were bashing the name last year are scrambling to get back in.
“After hitting a wall last year due to stale merchandise, poor product values and in-store disruptions, FIVE has turned around their operation, posting beats all year, with a massive step-up in Traffic, Ticket and total comp in 3Q25.”
— Lead analyst note, December 2025
Why the Multiple Can — and Should — Expand
Here’s the part that really caught my attention.
Even after the huge rally, Five Below still trades at a valuation multiple below its own five-year average. That’s wild when you think about it — earnings are going up, margins are expanding, and the growth story is actually getting more credible, not less.
Truist argues the market is still pricing in the “old” Five Below — the one that relied too much on fad items and struggled with basic execution. The new version has fresher assortments, better in-store experience, and — crucially — a much broader customer base.
- Teenagers still love it (obviously)
- But now parents are shopping there for household essentials
- College students load up on dorm decor
- Even value-seeking adults are discovering the Five Beyond section
The merchandise mix has evolved from 90% impulse to something far stickier. That’s the real “game changer” the analyst keeps circling back to.
The Tax Refund Season Catalyst Nobody’s Talking About
Here’s a sneaky angle I haven’t seen many people discuss yet.
Five Below’s core customer skews middle and lower-middle income — exactly the demographic that spends a disproportionate share of tax refunds in Q1. With refunds expected to be larger than usual in early 2026 (thanks to bracket creep and various credits), the setup feels almost too perfect.
Think about it: people walk out of H&R Block with an extra $3,000–$4,000 and immediately think “I deserve something fun.” Where do they go? Target is great, Walmart is practical, but Five Below is literally built for that “treat yourself for under $10” dopamine hit.
Historically, the company has seen a noticeable sales pop every February/March. This time the starting point is already much stronger.
Margin Levers Still Have Plenty of Room to Run
Another under-appreciated piece: operating margins are still well below historical levels.
During the pandemic peak, Five Below regularly printed high-teens EBITDA margins. Right now they’re scraping mid-teens even after the big improvement. Supply chain costs have normalized, shrink is coming down, and new stores are opening with higher productivity from day one.
Every extra point of margin drops almost straight to the bottom line. If they simply get back to 2019 levels, earnings could be 20-30% higher than consensus expects in a couple years — without needing any additional sales growth. Add realistic comps in the mid-single digits and you start to understand why “unicorn” isn’t hyperbole.
Risks? Sure, But They Feel Manageable
Look, nothing goes up forever. Consumer spending could slow. A bad product cycle could resurface. Competition from T.J. Maxx, Dollar Tree, or even Amazon remains fierce.
But here’s what gives me confidence: management has already lived through the worst-case scenario and came out stronger. They know exactly what stale merchandise feels like now. They’ve invested in trend-right buyers, better inventory systems, and store-level execution. The muscle memory is there.
In my experience, companies that survive a near-death experience and genuinely fix the core issues often become the best long-term performers. Five Below feels like it’s in that camp.
The Bottom Line
Maybe Five Below won’t turn into an actual unicorn and print 10x returns from here. But the setup for the next 12–24 months looks extremely favorable: accelerating growth, undervalued multiple, seasonal tailwind, and multiple margin levers still to pull.
When a respected analyst uses the phrase “unicorn-like growth” for a discount retailer that’s already up 65%, you sit up and pay attention.
I know I am.
And if the next couple quarters play out anything like the last two, a lot more people will be too.
