On Wednesday, the financial firm TD Cowen adjusted its outlook on Academy Sports & Outdoors Inc. (NASDAQ:ASO), reducing the price target to $58 from the previous $82, while continuing to endorse the stock with a Buy rating. The revision comes amid expectations of continued sales challenges for the retailer.
The company has been grappling with a sustained period of declining same-store sales (SSS), which are anticipated to drop for the 10th consecutive quarter. TD Cowen's analysis forecasts a 4% decrease in comparable sales on top of an 8% decline in the second quarter. Despite these headwinds, the analyst believes Academy Sports & Outdoors can still produce significant Free Cash Flow.
According to the firm's assessment, Academy Sports & Outdoors has seen a $214 million reduction in sales from FY22 to FY24E, with a corresponding $200 million dip in EBIT. The negative impact on comparable store sales has exerted pressure on the cost of goods sold (COGS) and selling, general, and administrative (SG&A) expenses, affecting the company's margins.
The analyst noted that the retailer's strategies to enhance customer loyalty and promote everyday value are crucial but must be carefully balanced with the introduction of new products. These initiatives are part of the company's efforts to navigate the challenging retail environment and improve performance.
In other recent news, Academy Sports & Outdoors Inc. has seen several adjustments to its share price target by various analyst firms. Evercore ISI cut its price target from $70 to $60, despite reaffirming an Outperform rating. This followed a decrease in the company's first-quarter comparable sales by 6%, although initiatives are expected to help sales rebound in the second half of the year.
UBS also adjusted its stance, downgrading the stock from Buy to Neutral and reducing the price target to $58. This was due to concerns about the company's financial guidance for fiscal year 2024 and debates about market share shifts.
Academy Sports reported a slight increase in Q4 sales, reaching $1.8 billion, despite a 3.6% decrease in comparable store sales. The company has also entered into an exclusive partnership with DoorDash (NASDAQ:DASH), offering on-demand delivery services from its 285 stores across 19 states.
Other analyst firms such as Truist Securities, Jefferies, and B.Riley have also adjusted their outlook on Academy Sports. These adjustments range from Truist Securities reducing its price target from $75 to $73, to Jefferies initiating coverage with a Buy rating and a price target of $85.
These developments reflect the ongoing analysis and adjustment of expectations surrounding Academy Sports' performance.
InvestingPro Insights
As Academy Sports & Outdoors Inc. (NASDAQ:ASO) faces a challenging retail landscape, real-time data from InvestingPro provides a mixed picture of the company's financial health and market performance. With a market capitalization of $3.81 billion and a compelling price-to-earnings (P/E) ratio of 8.16, the retailer appears to be trading at a low earnings multiple, which could signal an undervaluation relative to its earnings capacity. Moreover, the company's liquid assets surpass its short-term obligations, suggesting a solid liquidity position.
Despite recent sales challenges, Academy Sports & Outdoors has been profitable over the last twelve months, and analysts predict it will remain profitable this year. This is reflected in the company's robust return on assets of 11.2% for the same period. Additionally, two InvestingPro Tips to consider are the aggressive share buyback strategy by management and the fact that the stock has experienced a significant price drop over the last three months, which may interest value investors looking for potential bargains.
For those seeking a deeper analysis, InvestingPro offers more insights on Academy Sports & Outdoors, including additional InvestingPro Tips. By using the coupon code PRONEWS24, readers can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking valuable information that could inform investment decisions.
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