Deutsche Bank upgrades Dollar Tree, says activist investor can help stock rise more than 30%
The arrival of a new activist investor could be great news for Dollar Tree shareholders, according to Deutsche Bank. The retail company said in a filing Friday that activist investor Mantle Ridge has acquired 12.7 million shares, or 5.7% percent of the company, and the Wall Street Journal reported that a former Dollar General executive is working with the activist. Deutsche Bank Analyst Krisztina Katai upgraded the stock to buy from hold, saying in a note to clients on Monday that the activist should help Dollar Tree turn around its Family Dollar unit. "The added element of a new large shareholder with a clear focus on unlocking meaningful value by closing the profitability gap between [Family Dollar] and [Dollar General] should lead to a more patient investor base with a longer-term focus, and frankly translate to one of the most compelling retail stories with an exciting narrative change underway," the note said. Deutsche Bank hiked its price target on Dollar Tree to $148 per share from $96, reflecting upside of nearly 31% from Friday. The stock rose more than 6% in premarket trading Monday. Shares of Dollar Tree have badly lagged Dollar General's stock over much of the past decade. The potential for Mantle Ridge to add a former Dollar General executive to the rival's board should help, according to Deutsche Bank. "While many investors view Family Dollar as structurally challenged, we are in the camp that believes a fresh set of eyes with an approach taken out from the DG playbook could prove to be exactly what DLTR needs," the note said. -CNBC's Michael Bloom contributed to this report.

Pedestrians walk past a Dollar Tree Inc. store in Detroit, Michigan, U.S. Sean Proctor | Bloomberg | Getty Images