ASO - Academy Sports and Outdoors attracts a new bull with Telsey pointing to improved profitability

2023-08-14 08:18:26 ET

Telsey Advisory Group started off coverage on Academy Sports and Outdoors ( NASDAQ: ASO ) on Monday with an Outperform rating.

Analyst Cristina Fernandez and team said they view Academy Sports and Outdoors ( ASO ) as a unit and sales growth story driven by market share gains as the company expands in its existing markets and enters new markets with better assortment, customer service, and go-to-market strategy.

"The stock's low valuation reflects the negative comp trend that began in 1Q22, and is expected to persist until 4Q23, and skepticism around the sustainability of a LDD operating margin vs. 4.1% in 2019. However, the hunting/outdoor categories that have declined the most are nearing normalization and the operating margin gains seem structural, signaling 2023 should be a reset year with a return to growth and stable profitability in 2024."

Looking ahead, Telsey forecasts sales growth of 5.8% for ASO in 2024 after it sees a decline of 2.1% in 2023. The firm also expects an operating margin of 12.2% in 2024 vs. 12.0% in 2023.

Telsey assigned a price target of $72 to the sports retailer to represent 30% upside potential.

Shares of Academy Sports and Outdoors ( ASO ) rose 0.85% premarket to $55.65 vs. the 52-week trading range of $40.67 to $69.02. Short interest on ASO stands at 12.06% of the total float. 15 out of 16 Wall Street firms covering ASO have a Buy-equivalent rating or higher, while the Seeking Alpha Quant Rating is only at Hold due to low marks for EPS revisions and valuation.

More on Academy Sports and Outdoors:

• Academy Sports and Outdoors: Staying Positive On Management's Ability To Execute Its Strategy
• Academy Sports and Outdoors earnings highlights
• Academy Sports and Outdoors earnings call transcript

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