Dicks Sporting Goods Inc (NYSE:DKS) received its Wall Street upgrade in less than a month Thursday, giving DKS stock a significant boost.
Dick’s has been in rally mode since late June, but worries started to emerge over the effects of the retailer’s winning bid for bankrupt Sports Authority.
But RBC Capital thinks fears about the $15 million deal causing disruption to DKS are overblown. As a result, RBC upgraded Dicks Sporting Goods to “Outperform” (buy, essentially) from “Sector Perform” (hold). Additionally, the analyst lifted the price target on DKS stock to $56 from $41. That leaves shares with implied upside of about 12% in the next year or so.
In late June, Goldman Sachs raised DKS stock to “Conviction Buy” from “Buy” and Stifel Nicolaus initiated coverage at “Buy.” Of the 29 analysts covering the stock, 17 have it at buy, 11 say it’s a hold and one calls it a sell, according to data from Thomson Reuters.
Is DKS Stock at a Target Price Ceiling?
The appeal of Dick’s Sporting Goods stock is that the sporting goods sector has been a rare bright spot in what’s been a lackluster year for retailers in general. The most recent monthly retail sales report showed that sporting goods store enjoyed growth of 6,4% in May. By contrast, department store sales dropped 4.4% and electronics and appliance retailers lost 2.3%.
Dick’s winning bid for Sports Authority in a bankruptcy auction should also boost market share and top-line growth.
Be forewarned that DKS stock could be set up for some short-term volatility. Analysts’ average target price of $50.52 leaves just 2% in implied upside left. That means we’re probably going to see some combination of downgrades on valuation and higher price targets.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
