Dick's Sporting Goods: Analyst sees long-term upside outweighing near-term noise

Investing.com -- Wells Fargo upgraded Dick's Sporting Goods to Overweight from Equal Weight in a note Monday, telling investors in a note that the developing multi-year story outweighs softer near-term trends.

Analyst Ike Boruchow said that while near-term trends look "squishy at best," with second-quarter estimates below the Street, "at current levels we are buyers of the risk/reward" and firm believers in a multi-year recovery led by Foot Locker, which Dick's acquired.

Wells Fargo sees multi-year margin upside at Foot Locker, with a potential return to 7% to 8% margins from 1% to 2%, driven by better allocation and merchandising.

It also pointed to execution at the core Dick's business, which it said is "in the early-innings of building a compelling fly-wheel," and views Dick's as "the best way to play Nike's eventual product turnaround," with checks pointing to bullish early reads on spring 2027.

Boruchow called the core business "the New Star of US Sport," citing category leadership and House of Sport and Field House remodels earning strong returns. He also flagged GameChanger, paid loyalty and the DICK's Media Network as "an under-appreciated flywheel."

On the second quarter, Wells Fargo models weak results, largely due to Foot Locker, with EPS of $3.72 below the Street, but said the go-forward outlook on back-to-school and second-half profit levers will be "more critical to story than the actual 2Q results."

The firm raised its price target on the stock to $240 from $220, based on 14 to 15 times 2027 earnings, and sees fiscal 2028 EPS power above $20.

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