JD Sports share price slump 'buying opportunity', says Berenberg
By Michele Maatouk
Date: Thursday 12 Dec 2019
(Sharecast News) - The recent slump in JD Sports' share price provides a good buying opportunity, Berenberg said on Thursday, as it hiked its price target to 860p from 800p.
The sports retailer's stock tumbled on Wednesday on news that its largest shareholder, Pentland Group, had sold off 24m shares in the company at 740p each. Berenberg said the weakness was a good opportunity to snap up the shares, of which the bank remains a big fan.
"JD Sports has been the star of the retail and sporting goods space, with the shares up by 110% year-to-date," it said. "JD's exceptional momentum has caught investors' attention, but valuation has come into sharp focus. With some investors fearing JD has run its course, a common pushback is that the company is 'another Foot Locker', which is a global sports-fashion peer that trades at a circa 65% discount to JD."
However, Berenberg argued that the JD premium is justified.
"We think that JD deserves to trade at a healthy premium to Foot Locker. Its greater diversification across product, brand and geography makes it a better-positioned business that is less volatile, faster growing and fundamentally more profitable. JD remains a strong play on the attractive sportswear space, while arguably offering a lower-risk and higher growth alternative to owning a single sports brand."
It added that JD's turnaround of Finish Line in the US continues to offer a compelling growth opportunity.
"Its US entry is not without risks but recent developments are encouraging and management appears more confident about its prospects. Finish Line is outperforming Foot Locker and we expect fewer net store closures than we had anticipated as management accelerates capital-light Finish Line conversions to JD stores, alongside organic JD store openings."
Berenberg has a 'buy' rating on JD Sports shares.
At 1040 GMT, the shares were up 1.7% at 739.20p.
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