Investing.com - Goldman Sachs downgraded Dollar General (NYSE: DG ) from Buy to Neutral on Tuesday, setting a price target of $116.00.

The investment bank cited valuation concerns following the stock’s recent recovery, suggesting that Dollar General’s improved fundamentals are now adequately reflected in its share price. Goldman Sachs noted that the company’s "Back to Basics" program has successfully improved comparable sales trends and margins.

Despite acknowledging potential for long-term margin improvement, Goldman Sachs identified two key challenges that could limit further stock appreciation: an intense competitive environment that might impact same-store sales, and ongoing investment needs in stores and supply chain infrastructure.

The downgrade comes after Dollar General has underperformed the broader market since being added to Goldman’s Americas Buy List on May 18, 2020, declining 37% compared to the S&P 500 ’s 110% gain during the same period.

Goldman Sachs supported its rating change with data from Google (NASDAQ: GOOGL ) searches, Placer.ai, and HundredX, which indicated Dollar General is lagging behind its peers in key performance metrics.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.