On Thursday, TD (TSX:TD) Cowen reaffirmed a positive stance on Dick's Sporting Goods (NYSE: NYSE:DKS), raising the price target to $226 from $177, while keeping an Outperform rating on the stock. The firm's projection is notably higher than the consensus estimates into fiscal year 2025.
The analyst from TD Cowen highlighted that the company's fiscal year 2024 same-store sales (SSS) guidance of 1%-2% surpasses the consensus of 1%, but falls short of their own estimate of 2.5%. The first half of the year is expected to see a boost in sales due to a calendar shift of weeks and the timing of store relocations and remodels.
The guidance for fiscal year 2024 gross margin is around 35%, which supports the view that the approximately 570 basis points of gross margin expansion compared to fiscal year 2019 is structural. Since fiscal year 2019, merchandise margin has increased by 260 basis points. Additionally, the company anticipates a modest leverage in selling, general, and administrative expenses (SG&A), in contrast to the roughly 155 basis points of deleverage experienced in the last year.
The new price target of $226 is based on 15 times the estimated fiscal year 2025 earnings per share (EPS) and 9 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). TD Cowen's EPS estimates for fiscal years 2024 and 2025 are $13.62 and $15.05, respectively, which remain above the consensus estimates of $12.90 and $13.97.
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