A Turn Of The Tide For Dick’s Sporting Goods
Dick’s Sporting Goods (NYSE: DKS) caught our attention in November when it popped up on a screen of institutional selling. While institutional selling remained high in the calendar Q4 2021 period and even reached a peak there is evidence that suggests a turn of the tide for this market. Major shareholder and chairman of the board E.W. Stack bought some shares and when we say bought some shares we mean he took another sizeable position in the company. Mr. Stack, in a single transaction, purchased 227,000 worth about 0.26% of the total shares outstanding bringing the total insider ownership up to and over 30%.
Net insider activity in 2021 was bearish but there is a mitigating factor to be aware of. The insider selling has been in retreat since the 2nd quarter of 2021 and neared 0 in Q4. Taking Mr. Stack’s transaction into account, net insider activity in Q4 is worth roughly $23 million while net activity in the 2nd half of the year is slightly more than $13.50 million.
The institutional activity is a red flag, however, that should not be ignored. Institutional activity accelerated in Q4 but there is a mitigating factor here as well. Institutional selling coincided with some large positions changes just before and right after the Q3 earnings were released. That activity is offset by some large purchases made in December and there is more to mitigate the activity as well. While the institutions were rotating into and out of the stock, the analyst’s sentiment edged higher from Hold to Buy and the consensus price target moved higher as well.
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Analyst Sentiment Firms For Dicks Sporting Goods
Analyst sentiment in Dicks Sporting Goods firmed over the last 6 weeks and points to a double-digit upside for the shares. The current consensus is a weak Buy, up from a firm Hold, with a consensus price target of $129.81. The consensus price target assumes about 13% of upside for the stock while the high price target of $180 implies a more robust 56%. The high of $180 was set by Cowen in the wake of the Q3 report and the consensus is still trending higher. The consensus estimate is up 132% over the last 12 months, 4% in the last 90 days and 2.5% in the last 30 as the analysts try to handicap Q4 results.
Dick’s Sporting Goods reports earnings for Q4 on March 10, 2022. The analysts are expecting a 20% sequential uptick in revenue that we think is underestimating the company’s momentum. The 4.8% YOY growth is a sharp deceleration from recent trends and does not, in our opinion, reflect the consumer strength we witnessed (and contributed to) in the last two weeks of the year. The takeaway is that Dicks’s Sporting Goods will more than likely outpace the consensus estimate unless it makes a significant move higher. Citigroup, notably, ranked Dick’s Sporting Goods the #1 pick for aggressive dividend growth this year.
The Technical Outlook: Dick’s Sporting Goods Is A Short-Squeeze In The Making
Shares of Dick’s put in a top during the 4th quarter but, in our view, the trend change was from up to sideways and not down, and now the trend is about to change again. One factor to be aware of is the short interest. Short-interest in Dick’s Sporting Goods topped 18.75% coming into January 2022 and has the company set up for a short-covering rally if not a short-squeeze. Price action appears to be forming a bottom at the $100 level right now. Resistance is at the $115 level. If price action can get above $115 we see it moving higher within the range leading into the next earnings report. If not there might be another opportunity to get in at the $100 before we see price action above $115.
Companies in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|DICK'S Sporting Goods (DKS)||$79.26||-0.1%||2.46%||5.71||Hold||$138.82|