Here's Why Dick's Sporting Goods Has 32% Upside

Goldman Sachs’ Stephen Tanal believes the closure on the outcome of The Sports Authority’s (TSA) bankruptcy process, expected on or soon after July 15, will boost investor confidence in market share gains for Dicks Sporting Goods Inc DKS.

Tanal reiterated a Buy rating on Dick's, with a price target of $53.

The analyst also added the stock to Goldman Sachs’ Americas Conviction List, while mentioning that the stock was likely to see potential upside of 32 percent.

Impact Of TSA Store Closures

Tanal pointed out that the company was the best positioned to benefit from TSA’s store closures, given that TSA was its largest competitor.

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In fact, 37 percent of Dick's stores face competition from more than one TSA store within 10 miles, while 63 percent of TSA stores have a Dick's store within 10 miles.

“We expect sharp acceleration in earnings growth in 4Q16, as DKS cycles an easy compare with the benefit of share gain from TSA, and further acceleration in 1Q–3Q17, when “full run rate” TSA benefits compound margin gains from in-souring eCommerce next year,” Tanal stated.

The analyst also said that TSA’s store leases had failed to garner interest from other sporting goods retailers, apart from Dick's.

At time of writing, Dick's was up 2.72 percent in Tuesday's pre-market session, trading at $41.16.