Retail Trends Spark Analyst Upgrades for DICK's Sporting Goods

Key Points

• After a recent macroeconomic data report on retail sales, Wall Street analysts found enough reason to boost a stock in a winning industry.
• The trend confirms that consumer trends are improving, and this company's sales might benefit from it.
• It trades at a premium to peers and has bullish price action as markets adopt this same view.

Some investors are worried about the growth of artificial intelligence and quantum computing, especially as it concerns the growing role they have in the stock market’s volume and activity. Retail investors have a diminishing chance to keep up with these machines and their consistent outperformance in the market, but there is still a chance after all.

Investors can attempt to outperform these machines by focusing on the inherent weaknesses of artificial intelligence, which boil down into a single sentence. Artificial intelligence is great at explaining the world that you feed it (through data and models to work with), but it does a poor job of understanding the world outside of that box. This is where investors can thrive by connecting the dots outside the walls of standard information.

Just like Wall Street analysts have done recently with shares of DICK’s Sporting Goods Inc. NYSE: DKS, finding the company somewhat undervalued today after being able to connect the dots with outside data. This time, one of the most important datasets for the consumer discretionary sector came out a bit lower than expected. This can be seen in the recent retail sales report for the month of December, though digging into it will reveal why DICK’s stock can fly.

A Hidden Gem Spotted by Wall Street

Inside the report, investors can notice a few outliers, starting with the sudden surge in miscellaneous store retailers, which went from a 3.9% contraction in November to a 4.3% expansion in sales for December. Coming in second place, sporting goods stores reported a 2.6% growth in sales for December, compared to a contraction of 0.6% and 0.3% the two months prior.

This means that, despite an overall slowdown in sales and concerns about inflation staying around for the United States economy, consumers were still willing to spend on these specific items, a theme that can definitely help stocks like DICK’s get ahead of the pack.

And that is where investors can connect the dots today and stay ahead of the short-term advantages that artificial intelligence has in today’s market environment. From this bullish breakout in sales, the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY delivered a net performance of up to 3.2% for the past week.

If price action is any indication of how the market feels about a sector, this can confirm to investors that some names in the retail space are gaining the market’s favor on new data. Now, here’s another gauge to connect the dots in a fundamental way.

Recently, banking stocks reported their first quarter 2025 earnings results. The overall trend suggests that both FICO scores and consumer credit quality have been improving for the past couple of months, giving stocks like DICK’s even more momentum to push from.

The Market’s Take on DICK’s Stock

Following this encouraging data and price action, Wall Street analysts decided to give their opinion on this stock, as it might be considered a potential “low-hanging fruit.” Those from TD Cowen decided to not only reiterate their Buy rating on DICK’s stock but also boost their valuations to a high of $294 a share as recently as January 2025.

To prove this new view right, the stock would have to stage a rally of up to 29% from where it trades today, which also means a new 52-week high. This would give investors all the bullish momentum they need to justify a potential buy in this company.

Then there is the way that the broader market is gauging DICK’s stock today through valuation metrics such as the price-to-earnings (P/E) ratio. Compared to the overall shopping goods stores industry’s average 12.5x valuation today, DICK’s stock trades at a much higher 16.3x.

Some would call this expensive, while others will understand that the market will always be willing to pay a premium for stocks it believes could outperform in the coming months or quarters. This theme can be better explained by looking at a specific peer in the industry who should have seen the same bullish treatment from retail sales.

Academy Sports and Outdoors Inc. NASDAQ: ASO is a close peer in a similar market to DICK’s stock. This name, however, trades at a much lower 68% of its 52-week high and a subsequent P/E discount to the broader industry through its 8.6x valuation today.

All told, investors now have the tools and framework to connect the dots on stocks like DICK’s and others moving forward so that they can make 2025 their best trading year yet.