Ross Stores (NASDAQ:ROST) saw its stock gain about 2% in Wednesday’s premarket session, climbing to $132.55, after Jefferies analysts upgraded the stock to “Buy,” citing a compelling valuation relative to peers and improving profit potential over the next few years.
The firm raised its price target to $150, projecting a roughly 13% upside. Jefferies noted that Ross currently trades at around 19 times forward earnings—six points below industry leader TJX Companies (NYSE:TJX) and further below its usual one-point discount. Burlington Stores (NYSE:BURL), by contrast, trades near 22 times forward earnings.
Analysts anticipate same-store sales will pick up in the second half of the year, helped by easier year-over-year comparisons and better performance in women’s fashion and beauty categories. Jefferies expects third-quarter comparable sales to rise 3.3%, outpacing the 2.5% consensus, and projects 3.5% growth in the fourth quarter—just under the chain’s long-term 3.8% average.
The brokerage sees Ross’s operating margin improving by approximately 170 basis points by fiscal year 2027, driven by leverage on fixed costs and gains from prior investments in branded products.
Their forecast puts EBIT margins at 11.5% in 2025, 12.4% in 2026, and 13.5% by 2027—levels approaching pre-COVID norms, even with some drag expected from expansion projects and tariffs.
Jefferies also highlighted leadership changes, noting that new CEO Michael Hartshorn is just six months into his tenure, suggesting strategic potential still remains largely untapped.
With about 25% of revenue tied to home goods, Ross could benefit from a housing market rebound if mortgage rates decline. Jefferies added that short interest remains slightly elevated, but low investor expectations may set the stage for upside surprises, especially as the retailer narrows its valuation gap with larger competitor TJX.