Goldman Sachs cuts target price on Sports Direct

Weakness in Europe led Goldman Sachs to lower its forecasts and price target for Sports Direct.

Revenues were now expected to grow by just 1% year-on-year, and not 1.5%, as a result of the weaker pattern to European revenues.

The broker also updated its depreciation/amortization and bonus charges on the back of the guidance provided by the company.

The combined impact of the above drove a 6.6% reduction in the broker’s forecast for the company’s profits before tax in fiscal year 2016 to £309m.

Nonetheless, the sports goods retailer’s earnings per share were still seen sprinting ahead at a year-on-year clip of 8% to reach 38.4p.

Analysts Richard Edwards, Abhilash Mohapatra, Natasha de la Grense and Alexandra Walvis also lowered their PBT forecasts for fiscal years 2017 and 2018 by 8% and 11% to £339m and £378m, respectively.

Furthermore, increased investment in freeholds and bigger stake in Heatons meant the company’s would end fiscal year 2016 with net debt of £50m from net cash of £170m, the analysts said in a research note dated 10 December.

The broker kept its ‘buy’ recommendation on the shares but lowered its target price from 850p to 725p.