Dick?s Sporting Goods Poised for Margin Expansion: JPM

[Stocks-to-Watch]

Dick’s Sporting Goods (DKS) could surprise a lot of investors in the coming year, wrote JP Morgan analyst Christopher Horvers in adding the stock to his “focus” list and* upping the price target.

Investors appear to be underestimating the degree to which Dick’s will be able to expand margins, Horvers argues.

“One of the pushbacks on DKS that we consistently hear is its low returns. We note, however, that DKS is only half way through to its ultimate store penetration and in the early stages of using technology (and scale) to drive margin improvement. We expect the company to exceed its designated 10% operating margin target within the next 3-4 years from 8.3%E in 2011.”

He sees the stock, now at about $41, hitting $50, up from his prior target of $45.

“With leading footage growth, preeminent market positioning, secular/fashion/pricing tailwinds, strategic sales/margin drivers, and easy weather comparisons in two key seasons, DKS stands out in terms of its upside potential.”



Original Article Source by Barrons.com