NEW YORK (TheStreet) -- Dollar General (DG) shares are down -0.6% to $63.73 in early market trading on Tuesday, a day after the company announced its $8.95 billion bid for rival Family Dollar (FDO) .
Analyst Daniel Binder at Jefferies (JEF) reiterated the firm's "buy" rating on the stock Tuesday in response to the news, and suggests that the company's estimates of $550 million to $600 million in synergy savings through the deal are understated.
"We also believe synergies are understated at $550-$600 million and could ultimately be closer to $1 billion. This gives DG the flexibility to bid higher and win any bidding war that may erupt with Dollar Tree (DLTR) ," he said.
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Separately, TheStreet Ratings team rates DOLLAR GENERAL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate DOLLAR GENERAL CORP (DG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."