Five Below's (FIVE) recent Q1 performance is driven by a combination of better store execution, broader product strength, and improved customer traffic rather than one-off trends, UBS said in a Wednesday note.

The company reported strong Q1 results, with same-store sales rising 7.1%, exceeding its earlier estimate of 6.7%, supported by a 6.2% increase in transactions, the investment firm said.

The company's earnings per share reached $0.86, beating the consensus estimate of $0.83, helped by strong merchandise margins and operational efficiency, UBS said.

Five Below is expected to benefit from easier year-over-year comparisons, recent pricing changes, labor investments, and an extended holiday shopping season, according to the note.

Despite its conservative guidance of 0% to 3% same-store sales growth for H2, Five Below could earn over $5 per share in 2025 and approach $6 in 2026 if momentum continues, UBS analysts noted.

UBS maintained a buy rating for Five Below and raised its price target to $160 from $110.

Shares of the company were up about 6% in recent trading.

Price: 130.22, Change: +8.98, Percent Change: +7.41