Dick's Sporting Goods Inc. (DKS) is in it for the long run.
According to JPMorgan analysts, the specialty sporting goods retailer is a "long-term survivor" in its sector, capable of standing the test of time even as its peers shutter stores. That earned Dick's stock a JPMorgan upgrade to "overweight" from "neutral," and a new price target of $32, implying a 20% upside for the stock from its opening price Wednesday.
In their note, analysts said Best Buy Co. Inc. (BBY) is the best analogy for Dick's future. Dick's is to sporting goods retail as Best Buy is to electronics - sturdy enough to weather the storm.
That's because Dick's is set to benefit from an "athletic inventory clean up" during the first half of 2018. A reduction in store inventories will alleviate promotional pressure and improve the average ticket, JPMorgan said.
Additionally, Nike Inc.'s (NKE) recent focus has turned to better managing channels and dialing back exposure to "undifferentiated retail," analysts said. That's a positive step for Dick's, offering a boost to its valuation and results. Expanded private label offerings from names such as Nike or Under Armour Inc. (UA) could insulate the company's positioning, JPMorgan said.
Analysts said they "appreciate the company's consistent focus on investing in its stores and the efforts in 2018 to put the customer at the center." Those moves, such as more workers and better customer service, could lead to further improvements moving forward.
Dick's investors took well to the upgrade, sending shares higher 5.4% to $26.97 midday Wednesday. Since the start of the year, Dick's stock has shed about 49% of its value.
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