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On Friday, JPMorgan issued a downgrade for JD (NASDAQ:JD) Sports (JD/:LN) stock from Overweight to Neutral, adjusting the price target to GBP1.05 from the previous GBP1.71. The decision comes in the wake of the company's third-quarter results released yesterday, which prompted the financial firm to reassess its outlook on the retailer.
The analyst from JPMorgan highlighted that despite the upcoming key trading weeks of the fourth quarter, which traditionally accounts for approximately 30-35% of JD Sports' annual sales, there is now less confidence that JD Sports' evolving brand mix can counteract the anticipated ongoing weakness in Nike (NYSE:NKE) sales. This change in perspective is based on projections extending into FY26.
JD Sports' recent performance was affected by several external factors, and the analyst noted a particularly low visibility for the first half of the next year. The revised approach includes an expectation of stable year-over-year organic growth for FY26, driven primarily by Nike rather than other brands, which, according to company statements, remain strong, especially adidas, On, and New Balance.
Following the quarterly results, JPMorgan has reduced its adjusted profit before tax (PBT) estimates by 3-13% for FY25-28, which now sit 6% below the consensus for FY25-27. These adjustments reflect both the new guidance provided by JD Sports and a more conservative stance on the outer years.
JD Sports' shares experienced a downturn yesterday, continuing a trend of underperformance that began after the interim results were announced. While the valuation based on JPMorgan's estimates indicates that JD Sports is trading at 6.3x FY27 PE, the analyst suggests that given the high level of earnings uncertainty and absence of a clear catalyst, the shares may face difficulties in regaining ground in the upcoming months.
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