DJ Foot Locker Hasn't Gotten Credit for Its Stake in Popular Online Marketplace GOAT, Citi Analyst Says -- Barrons.com
Foot Locker's investment in a growing third-party online market for athletic shoes may be overlooked by investors, according to Citigroup.
Analyst Paul Lejuez raised his rating to Buy from Neutral on the retailer, setting a new price target of $60 from $47. The shares are even cheaper than they look, the analyst said.
Foot Locker (FL) invested $100 million in GOAT two years ago. The online marketplace seeks to profit from a thriving sneaker culture in which young people pay hundreds or thousands of dollars for rare shoe models, but GOAT is also looking to expand into fashion beyond shoes.
The company's investment "will help them participate in a growing 3rd party sneaker market and its investment may be getting overlooked," Lejuez said in a note Friday.
Without GOAT, Foot Locker's core business trades at 3.6 times estimated 2021 enterprise value to earnings, he said, making it a good investment relative to risk.
Shares of Foot Locker rose 1.6% on Friday, at a 52-week high of $50.28. They are up 19.3% in the last year compared to the 16.6% gain in the S&P 500.
Stimulus is another factor in Foot Locker's favor, Citi said. Last year, people used their federal pandemic relief checks to buy sneakers and other attire. Another round of stimulus being negotiated on Capitol Hill could mean another sales boost this year.
Foot Locker has been a pandemic winner, blowing through expectations in the third quarter after reporting an increase in same store sales, where analyst had forecast a decline.
Analysts tracked by FactSet expect Foot Locker to report fourth quarter earnings per share of $1.27 on sales of $2.26 billion.
"We believe FL is a good way to play the economic recovery," Citi said.
Write to Liz Moyer at Liz.Moyer@barrons.com
(END) Dow Jones Newswires
February 05, 2021 12:08 ET (17:08 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.