On Wednesday, TD (TSX:TD) Cowen adjusted its outlook on Academy Sports & Outdoors Inc. (NASDAQ: ASO), reducing the stock's price target from $56.00 to $54.00 while maintaining a Hold rating. The firm pointed to the need for same-store sales (SSS) improvement as a key factor for meeting future consensus estimates.
The analyst from TD Cowen highlighted that without an uptick in SSS, the projections for fiscal years 2025 and 2026 might be overly optimistic. This outlook takes into account the potential increase in selling, general, and administrative (SG&A) expenses due to the company's investment in expanding its store count, despite a plan for fewer new openings.
The firm acknowledged Academy Sports & Outdoors' consistent performance in managing gross margins. Additionally, the analyst noted that the company's initiatives to refresh its product assortment could bolster same-store sales as the retailer heads into the spring and summer seasons.
In explaining the rationale behind the revised price target, the analyst cited valuation metrics, setting the new target at 8 times the estimated earnings per share (EPS) for fiscal year 2025 and 9 times the projected free cash flow (FCF).
The updated price target of $54.00 reflects a cautious yet watchful stance from TD Cowen, suggesting that while there are positive aspects to Academy Sports & Outdoors' strategy, the company faces challenges that could impact its financial performance in the coming years.
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