HIBB - Hibbett's Undervaluation Has Been Corrected (Downgrade)

2024-01-31 13:40:32 ET

Summary

• Hibbett's stock has performed exceptionally well, with a total return of 89% since my previous write-up with a buy rating.
• The company's financial performance has been mixed due to a pressured consumer spending, with declining revenues in Q2 and Q3 but a well-performing profitability and higher margin guidance in Q3.
• Hibbett's signed a new partnership agreement with Nike, combining the companies' loyalty programs. The new partner could pose moderate upside to Hibbett's financial performance.
• While the financials have performed quite well, the valuation has now mostly caught up with reality. As such, I downgrade into a hold rating.

Hibbett ( HIBB ) has performed exceptionally well after my previous write-up on the stock, where I initiated the stock with a buy rating. Since the write-up's publishing on the 11th of July, Hibbett has had a total positive return of 89% compared to a S&P 500 appreciation of 11%. The stock has reached a price of $69.40 at the time of writing, being around my previous DCF model's fair value estimate of $67.02. As the valuation seems to have been corrected, I believe that a revisit to the investment case is useful....

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