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

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Morgan Stanley commented on Dicks Sporting Goods Inc (NYSE: 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.

“The Sports Authority and DKS have a relatively high footprint overlap. ~40 percent of The Sports Authority’s 451 stores are within 5 miles of Dick’s 603 stores (~65 percent within 10 miles),” according to the note.

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 in-line guide 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 recently traded at $55.07, up 0.35 percent.

Latest Ratings for DKS

DateFirmActionFromTo
Apr 2019ReinstatesNeutral
Dec 2018MaintainsBuyBuy
Dec 2018DowngradesBuyNeutral

View More Analyst Ratings for DKS
View the Latest Analyst Ratings

Posted-In: Morgan Stanley Simeon Gutman The Sports AuthorityAnalyst Color Analyst Ratings

 

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