JD Sports (LON: JD.) shares have had a rollercoaster ride in 2023, up 8% YTD but down 23% in the last six months. 

The question now is whether the pullback provides an excellent opportunity to buy into the sportswear giant. 

Berenberg’s Top Pick

According to Berenberg, it does. The firm raised its price target on the stock to 225p from 210p on Friday, even going as far as labelling the London-listed company its “top pick” in the sector. 

Berenberg’s analysts acknowledged the recent decline, explaining that since the JD Sports capital markets day in February, it has fallen almost 30% as macro uncertainties weigh heavy. 

However, the investment bank believes that for the quality and growth JD provides, it offers “extreme value” and is cheap against every peer group.

The share price slide “looks harsh” to Berenberg as “consensus earnings have continued to rise,” the firm explained in its research note. 

“We think risks are lower than the market fears,” they wrote, adding that “investors still underappreciate the strength of JD’s model, its positioning, and the international opportunity.”

The bank says the JD share price is undervalued and priced for significant downgrades, which it does not see, contending the company is a “global brand dominating ‘mindshare’ of the generation-Z consumer.” 

“There is strong international demand for JD, the foundations for growth have been set, and store targets look very achievable, ‘derisked’ by local management expertise, leading e-commerce and attractive store economics,” they added.

Credit Suisse Bullish, But See Potential Risks

While Berenberg believes that near-term concerns for JD Sports, which will report interim results on September 21, are well overdone, Credit Suisse is unsure. 

The firm, which has an Outperform rating on the stock, lowered its price target for JD to 208p from 220p in a note earlier this week. 

The investment bank said that while they don’t see JD running into the same issues as peers (the Nike allocation and shrink), they believe the main risks to the retailer maintaining its full-year profit before tax guidance of around £1.04 billion will largely depend on back-to-school demand trends, the promotional environment, and smaller brand performance. 

Online Trends Weak

When assessing recent online consumer demand trends for JD Sports, we have seen a decline in both (UK and US) web traffic and (worldwide) Google searches.

While that, of course, does not provide us with the full picture regarding the demand and JD’s overall performance for the upcoming reporting period, it does suggest that second-half expectations may be tempered if online trends are representative of current in-store demand.

By Sam Boughedda