UPDATE: Morgan Stanley Initiates Coverage On Dollar Tree

In a report published Tuesday, Morgan Stanley analyst Vincent Sinisi initiated coverage on Dollar Tree (NASDAQ: DLTR) with an Equal-weight rating and $61.00 price target.

Sinisi noted that although there a no "meaningful" near-term catalysts for Dollar Tree, the company should "continue to execute well, performance will be steady, and growth will continue but not accelerate until we have an improved macro environment."

The analyst emphasized the strength of the company's $1.00 price point as the macro environment improves. Morgan Stanley added that the possible margin pressure will not affect declining margins, rather, give the company a competitive edge.

Given the average $400 million of annual free cash flow over the past five years and the recent share repurchase program, Sinisi expects the repurchases to drive EPS growth. Morgan Stanley estimates a 2013-2016 estimated EPS CAGR of 16 percent versus the Net Income CAGR of 11 percent for the period.

Shares of Dollar Tree closed at $53.77 on Tuesday.