Shares of UK-based JD Sports Fashion PLC (GB:JD) surged over 8% yesterday after analyst Alison Lygo from Deutsche Bank upgraded her rating to Hold from Sell. Meanwhile, Lygo kept her price target unchanged at 110p, implying 7.4% upside potential. This provided some relief to investors after JD Sports’ stock dropped more than 14% earlier this week due to a profit warning.
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The company now expects its adjusted pretax profit to fall at the lower end of the forecast range of £955 million to £1.035 billion for FY25.
JD Sports Fashion specializes in branded sportswear and fashion, offering products from top brands like Nike, Adidas, and its labels.
Deutsche Bank Raises JD Sports Rating amid Profit Concerns
While Lygo upgraded her outlook for JD Sports stock, she highlighted some concerns. The analyst believes that the company’s reduced forecast undermined the already fragile confidence of investors. She noted that the decline in sales in the U.S., particularly in like-for-like sales, had a significant negative impact.
In Q3, the company’s like-for-like (LFL) sales fell by 0.3%, with declines in all major markets: 2.4% in the UK, 1.5% in North America, and 3.8% in Asia-Pacific. The decline was primarily due to weak customer demand, particularly in the U.S. due to elections, and unseasonably mild autumn weather.
Overall, Lygo’s Hold rating implies that while there is potential for improvement, there are valid reasons to be cautious about the near-term outlook.
UBS Analysts Bullish on Festive Quarter
Recently, UBS analyst Robert Krankowski reiterated a Buy rating on the stock. His price target of 155p implies an upside potential of over 50%.
Krankowski noted that the reduced profit guidance raises concerns for the rest of 2024 and the outlook for 2025. However, he believes Q4 will likely be a robust quarter due to festivities, contributing 35-40% of annual profits, which should help support a near-term rebound.
Are JD Sports Shares a Good Buy?
On TipRanks, JD stock has received a Moderate Buy rating, backed by three Buys, two Holds, and one Sell recommendation. The JD Sports share price prediction is 132.50p, which is 29.3% above the current level.
