Susquehanna Upgrades Finish Line (FINL) to Positive

November 3, 2016 6:25 AM EDT
Get Alerts FINL Hot Sheet
Price: $22.72 -0.22%

Rating Summary:
    14 Buy, 17 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 11 | Down: 31 | New: 42
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Susquehanna upgraded Finish Line (NASDAQ: FINL) from Neutral to Positive with a price target of $23.00 following reports FINL is actively looking to sell JackRabbit, what they call a very positive development.

Analyst Sam Poser commented, "We are upgrading FINL from Neutral to Positive. According to Bloomberg news reports, FINL is searching for a buyer for its JackRabbit specialty running retail business. We believe these reports to be accurate. On the 2Q17 earnings call, FINL management said that JackRabbit was under strategic review, and its fate would be determined by the end of FY17. A sale would likely be accretive to EPS, but more importantly, allow FINL to sharpen its focus on the Finish Line banner. As we wrote in our 10/11/16 initiation, FINL is, at its core, a mall-based athletic specialty retailer, not a performance running retailer. We believe jettisoning the JackRabbit performance running business would help FINL more clearly define its identity in the marketplace while providing a needed focus on improving the core Finish Line business.

Recall that FINL's brick and mortar comp growth has been close to flat over the last 10 years vs. Foot Locker's ~MSD increase. After lagging for so long, we believe that, without the distraction of Jack Rabbit, FINL will be able to capitalize on improving product allocations, easy SSS/GPM comparisons, and overall athletic cycle tailwinds. In our view, the ~20% drop in FINL shares since early September presents investors with an attractive entry point. FINL is now trading at 11.3x our FY18 EPS estimate vs. the historical average of 13.9x. We are leaving our EPS estimates and PT unchanged, but our $23 PT now implies ~17% upside. We continue to favor Positive-rated FL and DKS as top picks, but we now believe the upside for FINL warrants a Positive rating."

For an analyst ratings summary and ratings history on Finish Line click here. For more ratings news on Finish Line click here.

Shares of Finish Line closed at $19.60 yesterday.



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