Big Lots, Inc. (BIG) shares fell 5% during Thursday's session after Loop Capital downgraded the stock to Hold with a $60 price target.

Key Takeaways

  • Big Lots shares moved lower on Thursday after Loop Capital downgraded the stock to Hold with a $60 price target.
  • Analyst Anthony Chukumba cited the stock's valuation for the downgrade and recommended that investors consider Dollar General Corporation (DG) instead.
  • Big Lots stock moved off of its highs made earlier this week, but the relative strength index (RSI) still points to overbought conditions, and more consolidation could lie ahead.

Loop Capital analyst Anthony Chukumba cited the stock's valuation, rather than a bearish fundamental outlook, for the downgrade. The analyst also urged investors to shift their positions to Dollar General, which he believes will benefit from a more predictable business model and a longer future square footage growth runway.

Big Lots shares moved sharply higher on Wednesday following an acceleration in retail spending in January. Gordon Haskett analyst Chuck Grom believes that the 2020 holiday season could go down as one of the best over the past decade, with several retailers already having posted strong same-store sales growth for the month.

Tip

Same-store sales statistics provide a performance comparison for the established stores of a retail chain over a given time period, such as a fiscal year or quarter or a calendar year or quarter, comparing revenues for the current period to the same period in the past – for example, comparing first quarter 2016 revenues to first quarter 2015 revenues.

Chart showing the share price performance of Big Lots, Inc. (BIG)

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From a technical standpoint, Big Lots stock moved off of its highs made during Wednesday's session. The RSI remains in overbought territory with a reading of 71.35, but the moving average convergence divergence (MACD) remains in a bullish uptrend. These indicators suggest that the stock could see some consolidation over the near term, but the long-term picture remains bullish.

Traders should watch for consolidation between highs of around $65.11 and trendline support at $54.00 over the coming sessions. If the stock breaks down, traders could see a move toward trendline support and the 200-day moving average at around $42.26. If the stock breaks out, traders could see a move toward trendline resistance at around $74.00, although a move that high seems less likely to occur given the extended valuation.

The Bottom Line

Big Lots shares moved sharply lower during Thursday's session after Loop Capital downgraded the stock to Hold with a $60 price target. With an overbought RSI and bullish MACD, the stock could see some consolidation above trendline support levels before resuming its move higher over the intermediate to long term.

The author holds no position in the stock(s) mentioned except through passively managed index funds.