1 Wall Street Analyst Thinks Dollar General Stock Is Going to $110. Is It a Buy?

Dollar General's (NYSE: DG) focus on offering discounted essentials could make it a top defensive play for 2025, especially with the stock trading at a deep discount. Melius Research analyst Karen Short recently upgraded the stock to a "buy" rating with a $110 price target, implying upside of 27% over the current $86.85 share price.

Is Dollar General stock a buy?

Dollar General reported a net sales increase of 4.5% year over year in the fourth quarter, with same-store sales up 1.2%. With solid top-line performance, the stock's collapse over the past year looks overdone. Investors could be undervaluing Dollar General's potential to deliver sales growth in a challenging retail environment.

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For the stock to move higher, Dollar General will need to improve profitability. Its fourth-quarter operating profit was cut in half to $294 million, partly due to store closures and an impairment charge for its pOpshelf business. But management's back-to-basics strategy should shore up the bottom line with a greater focus on improving inventory efficiency and reducing costs.

Tariffs on foreign imports could play to Dollar General's strengths. Higher prices for imported goods will push more consumers to look for deals, and Dollar General remains committed to delivering the value customers need.

When tariffs went into effect at the beginning of April, Dollar General stock jumped while the S&P 500 index plummeted. The stock offers relatively good value, trading at 15 times this year's earnings estimate. It also offers a high forward dividend yield of 2.71%.

Monitoring the impact of tariffs on consumer spending will be key, but Dollar General has navigated multiple economic cycles over its 85-year history. Assuming the back-to-basics strategy leads to improving profitability, the stock could move toward the analyst's price target within the next year.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.