- JD Sports Fashion
- 28 November 2024 15:31:08
Source: Sharecast
"It’s fair to say that JD Sports has not been a good stock pick in the past six months, culminating in a disappointing 3Q FY25A trading statement," Shore Capital said in a research note on Thursday.
A slowdown in October sales, especially in the UK and US, resulted in the company guiding to full-year profits at the lower end of the £955m-1,035m guidance range.
In the US in particular, Shore Capital highlighted that third-quarter like-for-like sales growth came in at -1.5% from +3.3% in the first half. "While the commentary highlighted the externalities driving this (US election, higher promotional activity, unseasonably clement weather, and no NPD from Nike), a turn around in the fortunes here will be key to improving investor confidence," the broker said.
Nevertheless, Shore Capital said it still remains positive on the medium-term outlook for JD Sports in the US, with the performance in Europe highlighting the growth opportunity for the business.
Reductions in full-year profit forecasts means Shore Capital's fair-value estimate for the stock has been reduced to 160p from 175p.
However, that still indicates substantial upside to current prices, with the stock up 2.3% at just 103.95p by Thursday afternoon. Even including the recent rebound in the shares over the past week, the stock is still down 22% over the past month and 35% lower over the year to date.
"Despite this cut, the shares look cheap to us, currently trading on CY25F EV/Sales of 0.6x, EV/EBITDA of 4.0x and EV/EBIT of 7.8x we see this current weakness as a great entry price with significant mid-term upside if the company can deliver on its ex-UK growth potential," the broker said.