:max_bytes(150000):strip_icc()/GettyImages-2234382425-02060eda3e3547d2bcd22f4a44c898eb.jpg "Dick’s Stock Just Got a Bullish Call from Goldman Sachs. Here’s Why.")
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Key Takeaways
- Goldman Sachs reiterated its “buy” rating on Dick’s Sporting Goods as the retailer expands with the acquisition of Foot Locker. Dick’s closed its $2.4 billion purchase of its rival earlier this month.
- Goldman analysts said the combination should further differentiate Dick’s from its competitors.
Dick’s Sporting Goods (DKS) stock is getting cheers from Goldman Sachs after the retailer’s $2.4 billion purchase of rival Foot Locker closed earlier this month.
The analysts wrote in a note to clients that a “strong sporting goods industry backdrop along with the global reach and scale of the combined company should result in even stronger vendor relationships which will further differentiate the banners against its competitors.” Dick’s moved to acquire Foot Locker in May.
Why This News Matters to Investors
Investors don’t always love mergers, which have a reputation of knocking companies off course, producing fewer synergies and savings and more distractions and complexity than expected. Goldman’s optimism about the Dick’s-Foot Locker deal is a vote of confidence in the deal, which was valued at above $2 billion.
Goldman reiterated a “buy” rating on the stock, adding that with the addition of Foot Locker, it has a price target of $274. That’s among the higher targets on Wall Street, according to Visible Alpha, which has a mean near $246. The shares are nearly 2% lower today, falling alongside broader markets, so Goldman’s target reflects a roughly 20% premium to recent prices.
“We expect Dick’s management can improve Foot Locker’s top line meaningfully as it manages its brand portfolio to include higher brand heat products, improve the store layout, and instill Dick’s service levels, which should help drive conversion,” Goldman’s analysts wrote.
Nike’s (NKE) change in strategy to refocus on its wholesale partners should give a lift to Foot Locker, which Dick’s plans to operate as a stand-alone business.
After sinking to a more than one-year low in May, shares of Dick’s Sporting Goods have gradually risen and are roughly unchanged for the year so far.
