Sports Direct share price jumps as broker sees ‘better value’

Sports Direct’s (LON:SPD) share price surged this morning, after RBC Capital Markets raised its stance on the sporting goods retailer’s stock from ‘sector perform’ to ‘outperform’ and upgraded its target price for the shares from 650p to 800p.

The broker said in a note to clients that the business was “regaining momentum” and looked “better value” now versus its peers. “We think Sports Direct has retained its structural advantages of its own brand portfolio, strong logistics and a dominant position in UK sportswear retailing,” RBC stated. It added that Sports Direct’s strong balance sheet provides scope to boost shareholder returns.
Furthermore, RBC reckons that growth in the near term should be enhanced by Sports Direct’s online initiatives such as ‘click and collect’ services and a ‘fast-pay’ checkout solution. Overseas, the turnaround of the company’s Austrian business is taking longer than originally expected, while the weaker euro against the pound will act as a short-term headwind on sales. However, the broker foresees a gradual improvement as trading comparisons get easier this winter. Meanwhile, several key risks surrounding the business, including uncertainty over bonus scheme for staff, dollar/pound exchange rate and political views on zero-hours contracts, have eased.
Investors have reacted positively to RBC’s bullish comments, sending Sports Direct’s share price over three percent higher in early trading today. By 10:00 BST, the stock had gained 3.27 percent to sand at 725.50p.
Last week, the FTSE 100-listed group was hit by a critical note from Jefferies Group. In a note to clients, titled ‘Time to reach out’, the broker said that the company, majority owned by industry tycoon Mike Ashley, needed a “change in the tone of dialogue” as its communication with investors had “reduced significantly in recent months”.
As of 10:58 BST, Tuesday, 23 June, Sports Direct International Plc share price is 725.50p.

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