Morgan Stanley Says Dicks Sporting Goods Could Take Market Share From The Sports Authority

Morgan Stanley commented on Dicks Sporting Goods Inc DKS amid the news that The Sports Authority Inc. may default.

Analyst Simeon Gutman presented a "DKS Overlap with The Sports Authority" store analysis in a research note and suggested that a  hypothetical merger did not make sense.

Gutman felt that with The Sports Authority’s high debt load and store overlap with DKS, it may be preferable for DKS to continue taking market share from its struggling competitor.

The firm maintained an Equal-weight rating on the stock and noted that there should be good downside protection, however, upside expectations were limited.

Channel checks and supplier analysis indicated that Q4 comps will come in slightly below consensus with EPS either at or below consensus. On the upside, the Gutman felt that an an in-line gude for 2015 could help the stock offset a modest EPS miss.

“Applying the current 17x multiple to 2016 numbers would produce a stock price in the low $60‘s. While decent in our view, it is not compelling enough to be more constructive, Gutman concluded.

Dicks Sporting Goods Inc recently traded at $55.07, up 0.35 percent.