JPMorgan Cazenove downgrades JD Sports, slashes price target
By Michele Maatouk
Date: Friday 22 Nov 2024
(Sharecast News) - JPMorgan Cazenove downgraded its stance on shares of JD Sports on Friday to 'neutral' from 'overweight' following results a day earlier.
The retailer warned on Thursday that full-year profits would be at the lower end of forecasts after a "volatile" trading environment in October due to bigger discounts, milder weather and consumer caution ahead of the US election.
JPM slashed its price target on the stock to 105p from 171p. It said that while the key trading weeks of this year are still to come - Q4 accounts for around 30% to 35% of full-year sales - and although Q3 was hit by several external factors, it has less conviction that JD's changing brand mix will offset ongoing weakness in Nike and allow the retailer to deliver stronger growth next year.
The bank said: "Visibility feels particularly low for H1 and we now think it is prudent to assume stable organic growth year-on-year in FY26 (driven in our forecasts by Nike rather than other brands, which per company comments, continue to perform strongly, particularly Adidas, On and New Balance) and also model ongoing margin pressure (only partly related to National Living Wage and National Insurance increases in the UK)."
Following the results, JPM lowered its adjusted pre-tax profit estimates by 3% to 13% for FY25-28, reflecting the new guidance and its more cautious view on outer years.
JPM said that in this market environment, with a high level of earnings uncertainty and no clear catalyst to drive upside, the shares are likely to struggle to recover over the coming months.
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