UPDATE: Deutsche Bank Initiates Coverage On Hibbett Sports

In a report issued today, Deutsche Bank outlined its initial coverage of Hibbett Sports HIBB, announcing a Hold rating and a price target of $55.

Deutsche Bank's Mike Baker kicked off the outlook on Hibbett Sports slightly optimistic saying, "We see the key fundamental themes as mixed for Hibbett Sports. We see some positives and negatives as it relates to the sales line, but generally see it as an above average top line story."

In explaining his valuation Baker summarized a few key factors:

• Top line drivers are mixed - Hibbett should be able to grow its top line 9 percent over the next five years, above the
  hard line average of 6 percent. But this may be offset by industry weakness, as sales in 2013 slowed."
• Margins need to accelerate - With gross margins already 500 bps above Dick's and 35 bps of investment costs this year, we see less margin upside ahead.
• Favorable store economics leads to high ROIC - New stores return their investment in less than 2 years. Hibbett can therefore maintain a 7 percent square footage growth rate and still generate ROIC of 18 percent, compared to the hard line average of 16 percent.
• Competition may heat up online and on the ground - We see increased competition as the biggest risks facing Hibbett. This includes both online competition, as HIBB has an under-developed e-commerce strategy, and on the ground as growth from both Hibbett and Dick's will mean more store overlap ahead.

  At last check Hibbett Sports was trading at 51.64, up less than a percent.