Berenberg ups target price on 'top pick' JD Sports
By Iain Gilbert
Date: Wednesday 17 Apr 2019
(Sharecast News) - Analysts at Berenberg upped their target price on retailer JD Sports on Wednesday, noting that several near-term tailwinds had helped the group pick up the pace from a jog to a sprint.
With JD Sports continuing to buck the trend in retail, management seems confident that its year has started well, and with accelerating momentum, weakening comparatives and near-term profit tailwinds on the horizon, Berenberg believed that more upgrades were set to follow.
The German broker raised its 2020/21 earnings per share forecasts by 3-4% to reflect stronger top-line momentum and, while investors may fear they have "missed the boat" on JD, the analysts maintained that absolute and relative valuation "remains attractive".
"We raise our price target to 690p (from 570p), valuing JD at a c20% sector premium, with c11% EPS CAGR, sector-leading cash generation and blue-sky upside from Finish Line. The stock remains our top pick in the sector," said Berenberg.
JD remains bullish about its long-term Finish Line opportunity, with a strong performance in 2019 supporting confidence, and Berenberg believes that in a 'blue sky' scenario EBIT margins could rise to as high as 11% - versus roughly 3% today - which would add a further 20% to earnings.
Berenberg also highlighted that JD's recent acquisition of Footasylum could add "up to 10% to earnings", going on to reiterate its 'buy' recommendation.
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