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Telsey Advisory Group changed their outlook on Academy Sports & Outdoors Inc. (NASDAQ:ASO) on Friday, raising the stock’s price target to $83.00 from $70.00 previously, while maintaining an Outperform rating.
The company’s analysis recognized the challenges faced by the retailer in the fourth quarter of 2023 due to a weaker consumer environment and a highly promotional market. These factors were somewhat balanced by the company’s focus on value and strong performance during the Black Friday period.
The company noted that Academy Sports & Outdoors managed its inventory and markdowns effectively, contributing to a stable gross margin. As 2024 approaches, expectations are for sales to remain under pressure in the first quarter, with a forecast of stabilization in the second quarter and a return to growth in the second half of the year.
The retailer’s ability to execute its business strategy effectively was highlighted, along with the potential to expand its store base over the coming years. The company also pointed to the Academy’s attractive product assortment as a strength that will benefit the company once consumer health improves.
Despite the stock’s significant performance, which is up 40% since the third quarter report on Nov. 30, in contrast to the 13% increase in , the valuation is still considered attractive. The stock currently trades at about 9.5 times FactSet 2024 consensus estimates. Telsey expects further multiple expansion as the company’s comparable sales turn positive.
The price target increase to $83 is based on applying a price-to-earnings (P/E) multiple of approximately 9.5 times to Telsey’s estimated 2025 earnings per share of $8.70. This P/E multiple aligns with the stock’s current trading levels. The company had previously priced the stock using a multiple of 9.0 times its 2024 earnings per share estimate.
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