On October 16, the NY Post reported that Carl Icahn is accumulating a stake in Dollar Tree (DLTR – Research Report) . Apparently, we are looking at a ‘significant’ stake. On the news shares jumped 6.8%. The market is still awaiting details, but what we do know is that Icahn (Performance Profile) is an activist investor, known for pushing for changes at the company leadership level.

For investors, the key question is: is now the time to buy DLTR or are there better stock picks out there?

Full steam ahead

Five-star Oppenheimer analyst Rupesh Parikh (Track Record & Ratings) has an Outperform rating on the discount giant. He writes: “We continue to see meaningful optionality with the DLTR story from either an improving fundamental longer-term outlook or optionality with the Family Dollar asset.

Encouragingly, he believes the stock is trading at attractive levels as the market is undervaluing American variety store chain Family Dollar. The company, which boasts over 8,000 stores, was snapped up by DLTR back in 2015 for $8.5 billion. Icahn- who already owned a stake in Family Dollar- was said to make a $200 million profit on the deal.

“At a low $80s stock price, the implied Family Dollar valuation is just a low single-digit EBITDA multiple” points out Parikh. And as for Icahn joining the team, he gives this reaction: “We await more details on Icahn’s stake and the proposed actions that could potentially unlock shareholder value from here.”

Meanwhile top Loop Capital analyst Anthony Chukumba (Track Record & Ratings) calls Icahn’s move ‘unsurprising’ and a ‘positive development’ for the company. He has a Street-high price target on DLTR of $107 (24% upside potential).

Even though Family Dollar is struggling, core Dollar Tree “remains one of the best performers in deep discount retailing.” He thinks billionaire Icahn could pressure Dollar Tree management to quickly improve Family Dollar or sell the division- perhaps to Amazon, Dollar General or a private equity firm.

So should you invest?

However its clear Oppenheimer’s Parikh sees the stock as better for long positions given near-term choppiness: “We continue to view DLTR as appropriate for longer-term investors given aggressive Street EPS forecasts that could likely reset in coming quarters, elevated cost headwinds, and growing tariff risks.”

Indeed, we can see that the overall Street outlook on DLTR is a cautiously optimistic ‘Moderate Buy’. This is with a $92.25 price target (6% upside potential).

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View DLTR Price Target & Analyst Ratings Detail

A better buy

Dollar General (DG – Research Report) and Dollar Tree are the two largest dollar stores in the US, but there is one key difference: Dollar Tree only sells products that are $1 or under.

“DG still ranks ahead of DLTR for us given the risks associated with FDO [Family Dollar] turn from here” says Parikh.

“We remain impressed with the high level of store, digital, and merchandising innovation from the DG management team, which we believe positions the company well to continue gaining share” he wrote back in September. This is with a $120 price target.

Net-net: “DG remains a top pick for us, and we would put new money to work at these levels even after the rally lately.” Right now shares are up 19% year-to-date. Quite the contrast to DLTR which is down 19% year-to-date.

And it seems like he isn’t alone in this more bullish take on DG’s outlook. The stock scores a ‘Strong Buy’ rating from the Street. This is with only 1 Hold rating and a $119 average price target (8 percent upside potential).

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View DG Price Target & Analyst Ratings Detail