On Wednesday, Academy Sports & Outdoors Inc. (NASDAQ:ASO) experienced a shift in its stock outlook as BofA Securities adjusted its stance on the company's shares. The firm downgraded the rating from Buy to Neutral and reduced the price target to $63 from the previous $75. The revision comes in the wake of Academy Sports & Outdoors' first-quarter earnings, which did not meet the expectations previously set by analysts.
The company reported a GAAP EPS of $1.01 for the first quarter, falling short of the forecast by $0.19. This miss was attributed to a notable gross margin decline, which registered at 33.4% against the anticipated 34.5%. Additionally, same-store sales saw a decrease of 5.7%, a steeper decline than the 5% drop forecasted and at the lower end of Street estimates.
BofA Securities cited several concerns that influenced the downgrade, including disappointing first-quarter earnings results and a bleak outlook for sales and gross margins. The firm expressed caution over the possibility of further sales weakness and the potential for gross margins to dip below the company's guidance range. Another contributing factor to the revised rating is the apprehension regarding the spending capacity of Academy Sports & Outdoors' primary customer base, which largely consists of low-to-middle income consumers.
The new price objective of $63 is based on a revised multiple of 9 times the forecasted fiscal year 2026 earnings per share (EPS) of $7, which was decreased from the previous estimate of $7.25. This adjustment aligns the company's valuation more closely with its brick-and-mortar retail peers, reflecting the risks associated with the current retail environment and consumer spending trends.
In other recent news, Academy Sports & Outdoors saw various adjustments to its share price target by multiple analyst firms. TD Cowen reduced its price target to $58 from $82 but maintained a Buy rating, while Evercore ISI cut the price target from $70 to $60, maintaining an Outperform rating. UBS also revised its stance, downgrading the stock from Buy to Neutral and reducing the price target to $58 due to concerns about the company's financial guidance for fiscal year 2024.
Academy Sports reported a slight increase in Q4 sales, reaching $1.8 billion, despite a 3.6% decrease in comparable store sales. The company has also entered into an exclusive partnership with DoorDash (NASDAQ:DASH), offering on-demand delivery services from its 285 stores across 19 states.
Other analyst firms such as Truist Securities, Jefferies, and B.Riley have also adjusted their outlook on Academy Sports. These adjustments range from Truist Securities reducing its price target from $75 to $73, to Jefferies initiating coverage with a Buy rating and a price target of $85. These are some of the recent developments involving Academy Sports & Outdoors.
InvestingPro Insights
In light of the recent downgrade by Bofa Securities, current data from InvestingPro provides additional context for investors considering Academy Sports & Outdoors Inc. (NASDAQ:ASO). With a market capitalization of $3.81 billion and trading at a low earnings multiple of 8.16, the company presents an intriguing valuation proposition. Notably, the adjusted P/E ratio for the last twelve months as of Q4 2024 stands at an even lower 7.52, suggesting a potentially undervalued stock.
Despite a slight revenue decline of 3.69% over the last twelve months as of Q4 2024, Academy Sports & Outdoors has maintained a robust gross profit margin of 34.26%, indicating efficient cost management. Additionally, the company's liquid assets exceed its short-term obligations, reflecting financial stability. Investors should also note that the company's price has experienced a significant decrease over the last three months, presenting a potential entry point for value investors.
For those looking to delve deeper, InvestingPro offers additional InvestingPro Tips, including insights on management's share buyback strategy and analysts' profitability predictions for the year. With more tips available on the platform, interested readers can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a total of 10 additional InvestingPro Tips for Academy Sports & Outdoors.
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