Jim Cramer’s Game Plan This Week: 10 Stocks to Watch

8. Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI)

Number of Hedge Fund Holders: 32

Cramer stated that he remains optimistic about Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) despite a recent downgrade that the stock got.

“Now, earlier this week, Ollie’s Bargain Outlet caught a rare downgrade. It’s this purveyor of closeout merchandise [that] has been an outstanding performer for many years.  It’s a highly promotional moment for retail. This kind of off-price chain tends to be a big winner. Ollie’s gets tractor trailer, if your tractor trailer’s full of unsold premium price merchandise, and they get it for next to nothing, and then they sell the stuff to you at bargain basement prices. I don’t want to get off this horse.”

Ollie’s Bargain Outlet (NASDAQ:OLLI) is a retailer that offers a wide range of brand-name merchandise, including housewares, food, health and beauty products, electronics, clothing, toys, and more. On December 3, Wells Fargo downgraded the stock from Overweight to Equal Weight, reducing its price target to $95 from $100.

The firm suggests that the optimal time to invest in Ollie’s may have passed, noting that while management has strengthened the foundation and benefited from cyclical tailwinds, the future outlook appears more challenging than previously recognized. The analyst also points to uncertainties for Q4 due to the holiday calendar and Big Lot liquidations, as well as the potential for a less favorable closeout buying environment in 2025 due to tight retail inventories. With gross margin growth limited and Ollie’s meeting its target, Wells Fargo views the stock’s risk/reward as balanced at its current price.

Ollie’s Bargain Outlet (NASDAQ:OLLI) has shown consistent growth, with management reporting nine consecutive quarters of comparable store sales growth as of the second quarter. Looking ahead, the company upgraded its outlook for fiscal 2024, with plans to open 50 new stores, return to a 40 percent annual gross margin, and achieve an adjusted EBITDA margin in the low teens.