As the JD Sports share price plummets, is it a bargain?

JD Sports (LON: JD.) share price is in trouble after tumbling by more than 20% on Thursday. The stock crashed to a low of 118p, its lowest level since December 23rd. It has now plunged by more than 30% from its highest point in December.

Lower revenue and profits guidance

JD Sports and Fashion, the parent company of Footpatrol, Finnish Line, Shoe Palace, and Sport Zone, is having its worst day in over 30 years. The stock crashed hard after the company lowered its guidance because of weather and price cuts.

In a statement, the company said that its revenue growth was significantly behind its expectations. It also noted that consumer spending in the apparel segment was relatively weaker than expected because of the challenging macro environment. 

JD Sports now expects to make a pre-tax profit of between £915 million and £935 million. It had previously guided about £1 billion in pre-tax profit. This view was in line with the last Nike earnings, which warned that the industry was recovering at a slower pace than expected. 

Nike, the biggest company in the industry, said that its revenue grew by just 1% in the last financial year. It therefore decided to start a $2 billion cost-cut program in a bid to boost its profitability. 

Therefore, the question is whether JD Sports will weather the current storm and come out stronger. On the positive side, the company has numerous tailwinds going forward. For one, inflation in its key markets is falling, which could, in theory, lead to more customer spending.

Further, most analysts expect that the Federal Reserve and the Bank of England (BoE) start cutting interest rates. Companies like JD Sports do well in a period of moderately low-interest rates.

Still, challenges in the industry remains. The immediate challenge is on the ongoing crisis in the Middle East, which has led to higher shipping costs. In a statement, Next PLC, another British retailer, warned that the crisis will have material impact on its business.

JD Sports share price forecast

JD chart by TradingView

Turning to the daily chart, we see that the JD stock price made a strong down-gap on Thursday after the recent guidance cut. It recently moved below the key support at 123.90p, the lowest swing on October 26th. The shares have moved below all moving averages.

Therefore, I suspect that the stock will continue consolidating in the coming weeks as investors wait for more information. If this happens, the stock will likely retest the key psychological level at 100p.