Cowen Upgrades Dick's Sporting Goods (DKS) to Outperform
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(Updated - October 24, 2016 8:59 AM EDT)
Cowen upgraded Dick's Sporting Goods (NYSE: DKS) from Market Perform to Outperform with a price target of $64. Analyst John Kernan said focus group findings imply that Dick's is the clear omni-channel leader in sporting goods.
"Proprietary work surrounding market share gains, focus group findings and a customer satisfaction survey coupled with accelerating traffic trends at DKS ecom platform suggests momentum in the business. Consensus EPS estimates look conservative through FY18," said Kernan.
"We recently conducted two focus groups in Chicago to look at (1) how consumers shop for branded merchandise; and (2) to understand the strengths of Amazon’s apparel business. We see space for differentiated retailers offering unique experiences and exclusive product to compete effectively given focus group findings. Retailers received higher marks than Amazon related to breadth/depth of brand selection, convenience, store experience, curation of content, competitive pricing, service and, in some cases, free shipping/returns," continued the analyst.
Kernan added, "DKS already commands a ~10% share of the $67B U.S. sporting goods industry, while management is guiding to a long-term, high teens domestic market share opportunity assuming a low-to-mid single digit industry CAGR. If DKS captures 10% of the lost Sports Authority sales it could produce $270MM in incremental sales and a +300bps lift to SSS and $0.20 in annual EPS assuming incremental margin of just 13%."
Shares of Dick's Sporting Goods closed at $56.78 yesterday.
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