Dick’s Sporting Goods stock has upside potential, UBS reiterates buy

Investing.com - UBS maintained its buy rating and $225.00 price target on Dick’s Sporting Goods (NYSE:DKS) stock on Friday, citing significant upside potential despite market concerns. The stock, currently trading at $204.49, has shown strong momentum with a 12.89% gain over the past week. According to InvestingPro data, the company trades at an attractive PEG ratio of 0.85, suggesting undervaluation relative to its growth prospects.

The investment firm believes the market has priced in excessive downside risk for the sporting goods retailer, particularly regarding its Foot Locker (NYSE:FL) acquisition, which UBS acknowledges creates uncertainty but also offers potential value creation opportunities not fully recognized in the current share price. With a robust financial health score of "GOOD" from InvestingPro and analyst price targets ranging from $158.34 to $270, the company shows fundamental strength despite market skepticism.

In its base case scenario, UBS projects approximately 31% upside potential from the current $196 share price, targeting $251 based on combined company earnings per share of about $19 in 2027 and a conservative multiple of 13x compared to Dick’s five-year mean forward price-to-earnings ratio of 12x.

UBS’s more optimistic upside case suggests a potential 75% appreciation to $337 per share, forecasting slightly above $21 in earnings per share by 2027 with a multiple of approximately 16x, which aligns with one standard deviation above the company’s five-year mean forward P/E ratio.

The firm’s analysis indicates the risk-reward profile for Dick’s Sporting Goods shares is "heavily skewed to the upside" despite current market concerns about the Foot Locker acquisition.

In other recent news, Dick’s Sporting Goods reported robust first-quarter results, with a 4.5% increase in comparable store sales and earnings per share of $3.37, surpassing market expectations. This strong performance was driven by growth in the footwear market and a rise in average ticket prices. Analysts from Citi and DA Davidson maintained their ratings on the company, with price targets set at $200 and $230, respectively. DA Davidson noted that Dick’s Sporting Goods’ position as a key distribution partner for Nike (NYSE:NKE) in North America is strengthening, with expectations of increased market share.

Meanwhile, TD Cowen adjusted its price target for the company to $205, citing gains in footwear market share and customer cross-shopping behaviors. Williams Trading expressed concerns about the company’s pending acquisition of Foot Locker, suggesting potential distractions for management. Despite these concerns, the company remains confident in its fiscal 2025 earnings guidance, even in the face of tariffs. Recent developments, such as the Court of International Trade’s decision to strike down certain tariffs, provide a positive outlook for Dick’s Sporting Goods and other retailers.

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