Dollar Tree (DLTR) delivered improving performance through the holidays on the back of multi-price execution and discretionary categories, Morgan Stanley said in a report Monday.

But its 2026 outlook implies a deceleration in comparable sales growth, and traffic remains a work in progress, the report said.

The note also said the company's 2026 margin guidance was appropriate, although underlying multi-price execution, possible adverse effects of price elasticity, and macro headwinds on lower income households warrant monitoring.

"At ~16x NTM P/E, we believe the current valuation is intriguing, but balanced out by our view on traffic, considering possible macro headwinds ahead and the need for continued execution of the multi-price rollout," the report said.

Morgan Stanley cut its price target to $126 from $146 while keeping its equal-weight rating on the stock.

Price: 115.06, Change: +0.70, Percent Change: +0.61