Dick’s Sporting dips despite fifth upgrade this month
This morning, Telsey Advisory analyst Joseph Feldman upgraded Dick’s Sporting Goods (DKS) to Outperform as he expects industry pressures will stabilize. Since the beginning of the month, four other Wall Street analysts have upgraded the stock to buy-equivalent ratings, citing better sector trends and benefits from new U.S. tax reforms.
BUY DICK’S SPORTING
In a research note to investors, Telsey Advisory‘s Feldman upgraded Dick’s Sporting Goods to Outperform from Neutral and raised his price target on the shares to $42 from $25 as he adjusted his earnings per share estimates for the benefit from tax reform.
While the analyst acknowledged that the company is currently in a period of earnings pressure due to price competition on athletic apparel and footwear, driven by increased distribution to new channels such as department stores and online and too much inventory, he expects industry trends to stabilize in the second quarter of 2018, leading to better results for Dick’s Sporting in the second half of the year.
BETTER INDUSTRY TRENDS
Earlier this week, Susquehanna analyst Sam Poser also upgraded Dick’s Sporting to Positive from Neutral, saying the company’s results should surprise to the upside given a low bar and “less worse” weather driven sales trends.
The analyst said he continues to believe Dick’s needs to proactively take control of its business and focus on customer engagement rather than succumb to the promotional environment.
Overall, #Poser contended that better than expected earnings, starting with the fourth quarter of 2017 results and continuing with 2018, will drive shares higher.
The analyst also raised his price target on the sock to $41 from $25. Last week, his peer at Buckingham had upgraded Dick’s Sporting to Buy from Neutral, with a $39 price target, citing tax reform benefits and recent strength across retail.
Back on January 12, Deutsche Bank analyst Mike #Baker also upgraded Dick’s Sporting Goods to Buy, while raising his price target on the shares to $39 from $33.
The analyst told investors he sees industry trends bottoming, inventory levels coming back into balance with demand and therefore lessen the impact on gross margins, and reduced risk to margin forecasts as models already reflect increased investment spending.
Wells Fargo analyst Ike #Boruchow was the first to upgrade the stock this month to Outperform back on January 3, saying the outlook for Dick’s is improving.
The analyst noted that high-level industry trends appear to be stabilizing, and the company has already re-based 2018 numbers in a “prudently conservative manner.”
Further, with the consolidation occurring in the sporting goods industry, Dick’s Sporting can continue to take market share from struggling brick-and-mortar competitors and be the “survivor” of the industry’s consolidation, he contended.
Additionally, the analyst pointed out that as a 100% domestic retailer with a high tax rate, the company is a key potential beneficiary of U.S. tax reform. Boruchow raised his price target on the shares to $35 from $26.
In Thursday morning’s trading, shares of Dick’s Sporting (DKS) have dropped over 1% to $33.36. However, over the last month Dick’s shares are up nearly 13%.
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