Tractor Supply Stock Has Been Slumping. Buy the Dip, Citi Says.

Citi upgrades Tractor Supply to Buy from Hold, citing a potential rebound in foot traffic. (Courtesy Tractor Supply Co.)

Key Points

• Citi upgrades Tractor Supply to Buy from Hold and sets a target price of $62, anticipating a return to normalized growth.
• Tractor Supply’s stock fell 7.9% in September and an additional 5.2% so far in October due to slow foot traffic and weak same-store sales.
• New initiatives, including last-mile delivery and a pet pharmacy service, are expected to drive comparable-sales growth.

Tractor Supply had a rough September and the start to October hasn’t been much smoother. That pullback, however, has made the farm supplier an attractive retail stock, according to analysts at Citi.

The firm upgraded Tractor Supply to Buy from Hold and nudged its target price to $62 from $60, predicting a return to normalized growth due in part to a series of new sales initiatives. Shares were rising 1.5% to $54.70 in premarket trading Thursday.

Tractor Supply sat just under Citi’s $62 price target entering September, but high-frequency data showing slow foot traffic helped drive a mini-selloff. The stock shed 7.9% in September and has fallen 5.2% in October as of the close of trading Wednesday.

Weak same-store sales “is a theme across retail right now,” wrote Citi’s Steven Zaccone, but this trend may be temporary for Tractor Supply. Weather has a strong impact on Tractor Supply, considering the company’s farm and ranch clientele, and much of the country had an unseasonably warm and dry start to autumn. The cooler and wetter weather ahead should help, Citi argued.

Tractor Supply also has been rolling out a series of new initiatives that can expand its end markets. Its last-mile delivery service for businesses already is exceeding expectations and will reach 25% of the chain’s locations by the end of the year, Citi noted. The company also is amping up its digital penetration and launched a pet and animal pharmacy service earlier this year.

“We see [same-store sales] strength likely to continue the next several quarters based on steady traffic, pricing tailwinds building, new initiatives gaining scale, and easy compares,” Zaccone wrote.

The firm projects Tractor Supply’s comparable sales to rise 2.3% in fiscal 2025, 4.8% in 2026, and 4% in 2027. That kind of annual growth would represent an acceleration from roughly flat same-store sales in 2023 and 2024.

Write to Nate Wolf at nate.wolf@barrons.com