Bank Of America Sees Upside In Dick’s Sporting Goods, Upgrades To Buy

Bank of America analysts downgraded Dicks Sporting Goods Inc (NYSE: DKS) to Neutral in August, but the research firm now sees three reasons to turn bullish again on the retailer.

The Analyst

Robert Ohmes upgraded Dicks Sporting Goods from Neutral to Buy with a price target lifted from $43 to $55.

The Thesis

The case for turning bullish on Dicks’ stock is based in part on expectations for recent success of its premium footwear decks to continue into next year, Ohmes wrote in the note. The company’s premium footwear deck is found in 250 stores today and could expand to another 100 locations next year.

Second, Dicks’ Yeezy launch in September was a “big success” as the company sold a notable amount of shoes within hours of launch, the analyst wrote. In fact, the company’s second Yeezy launch resulted in the sale of every last shoe.

Third, the broader apparel category continues to perform well across multiple brands. Nike’s sportswear products remain a strong seller while adidas is enjoying continued momentum. In addition, Dicks’ private label expansion is seeing a “strong response” from consumers.

The research firm’s revised $55 price target is based on a multiple of around 15 to 16 times fiscal 2021 EPS of $3.55. This represents a premium to the stock’s 10-year historical average of 14 times and justified amid expectations for same-store sales momentum to accelerate.

Price Action

Shares of Dicks Sporting Goods flat at time of publication Monday.

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