JPMorgan starts coverage of JD Sports at 'overweight'

JPMorgan Cazenove initiated coverage of JD Sports at ‘overweight’ on Monday with a 1,000 price target, as it hailed the company "the sports fashion champion".

"While the sporting goods sector is seeing significant changes in the way brands distribute, we think JD Sports is standing out as a partner of choice for these brands, and should continue to benefit from ongoing wholesale consolidation in the medium term," JPM said.

It expects to continue to see solid topline and earnings growth, at 9% and 14%, respectively, over the next three years, broadly in line with sporting goods brands.

The banks said that trading at a 45% discount to sports brands, JD Sports is an attractive way to play the positive dynamics of the broader sporting goods industry, hence the initiation at overweight.

"Given the relative resilience of the sector so far during Covid-19, we would use short-term weakness and volatility as buying opportunities," it said.

JPM said that JD’s exposure to a strong and growing sector, solid execution and a successful omni-channel proposition mean it has delivered LFL growth of 10% on average over the last five years.

"We expect to continue to see robust LFL trends, supported by continued digital efforts, ongoing improvement of densities in the US market and, more broadly, consolidation in a good sector.

"This should be complemented by small space roll-out, mainly coming from the ongoing international expansion."

At 0920 GMT, JD shares were up 4.5% at 784p.