Goldman downgrades Dollar Tree to neutral, says company's improvements are priced in
Shares of Dollar Tree are getting too expensive and investors should avoid making a big bet on the stock, according to Goldman Sachs. Analyst Kate McShane downgraded the stock to neutral from buy, saying in a note to clients Monday night that the company's comeback story is now priced in. "We believe the stock now reflects the earnings uplift from the price increase at Dollar Tree as well as recent media reports around the potential for operational improvements, while incremental growth is likely limited due to an expected slowdown in discretionary spending by the low-end consumer and declining traffic," McShane wrote. Last week, the company reported third-quarter results that were largely in line with expectations and announced that it would raise prices on most products . The stock is up more than 6% since the announcement, though shares fell 3% in premarket trading Tuesday. The newly hiked prices could prove to be a drag on traffic, Goldman said. "The higher $1.25 price point at legacy Dollar Tree stores could limit traffic improvement if the perceived relative value has diminished, discouraging that incremental stop in a trip," the note said. Even with the downgrade, Goldman raised its price target on the stock to $150 per share from $116. The new target is 6.1% above where the stock closed on Friday. -CNBC's Michael Bloom contributed to this report.

People walk past a Dollar Tree store on November 23, 2021 in Los Angeles, California. Mario Tama | Getty Images