Morgan Stanley downgrades Sports Direct, says it's no longer undervalued

It said that with 8% implied downside from the current share price, an ‘equalweight’ stance is more appropriate.

“We continue to like the Sports Direct story in the UK and remain open-minded on its overseas expansion. However, we no longer view the international business as a free option with the shares up nearly 20% in the last six months,” it said.

The bank pointed out there has been a lack of progress on M&A within Continental Europe and said there are question marks over how well key international market Austria is progressing.

Still, the shares have risen by nearly 20% whereas consensus forecasts have been broadly flat.

MS said that on an absolute and relative basis, therefore, the stock has re-rated.

MS said upside risks to its view would include rapid share gains in SPD’s current overseas investments and/or announcement of international acquisitions. A key downside risk would be a more direct challenge from Decathlon in its key markets.

At 1000 BST, Sports Direct shares were down 2.6% at 719.50p.