Dick’s Sporting Goods (NYSE: DKS) could have more room to grow as the company continues to improve its business and works to turn around Foot Locker, according to Wells Fargo.
Helping, the firm just upgraded the stock from Equal Weight to Overweight, signaling that analysts now believe the stock offers an attractive opportunity. Wells Fargo also raised its price target from $220 to $240.
Analyst Ike Boruchow said Wells Fargo has become more optimistic about Dick’s long-term prospects. Rather than focusing only on the company’s upcoming quarterly results, the firm is looking at what could happen over the next several years. “At current levels we are buyers of the risk/reward,” Boruchow said in a note to clients, adding that Wells Fargo believes Dick’s is developing a strong multi-year growth story, as quoted by CNBC.
One of the biggest reasons for Wells Fargo’s optimism is Foot Locker, which is now owned by Dick’s Sporting Goods.
Foot Locker has been working through a major overhaul of its business strategy. The company is remodeling stores, improving relationships with vendors and making its products more visible across different sales channels, including its stores and online platforms. Wells Fargo believes these changes could eventually help Foot Locker significantly improve its profitability.
According to Boruchow, Foot Locker could potentially return to operating margins of 7% to 8% over the next several years. Better product allocation and merchandising are expected to be important parts of that improvement.
Dick’s Could Also Benefit from Nike
Wells Fargo sees another potential catalyst for Dick’s: Nike.
Nike has been working to turn around its business after a difficult period marked by weaker demand and changes in its product and sales strategy.
Because Dick’s is one of the largest sporting goods retailers in the United States, a successful Nike recovery could benefit the company. Wells Fargo believes Dick’s could be one of the better ways for investors to gain exposure to a future improvement in Nike’s products and sales.
Boruchow said early checks on Nike’s product pipeline for spring 2027 have been encouraging.
If Nike launches products that perform well with consumers, retailers such as Dick’s could see stronger demand. That could create another boost for Dick’s sales in the coming years.
Investors Are Already Seeing Some Improvement
Dick’s Sporting Goods’ latest results also provided some encouraging signs.
Dick’s reported first-quarter revenue of about $5.17 billion, or a 62.6% increase from the same period a year earlier. Revenue also came in about $100 million above analysts’ expectations.
Adjusted earnings per share were $2.90, which was slightly below the $2.91 expected by analysts. More importantly, the company raised the low end of its full-year 2026 comparable sales outlook for both Dick’s and Foot Locker.
Dick’s now expects comparable sales growth of 2.5% to 4%, compared with its previous range of 2% to 4%. Foot Locker’s comparable sales outlook was also increased, with the company now expecting growth of 1.5% to 3%, up from 1% to 3%.
The Bottom Line
With Wells Fargo now bullish on Dick’s Sporting Goods, with a $240 price target, Wells Fargo believes the company’s transformation is still in its early stages. The key question for investors will be whether Dick’s can successfully execute its plans and turn these investments into stronger sales and profits over the next several years.
