Dick’s Sporting Goods Stock: Undervalued Despite Rifle Sales Controversy
Dick’s Sporting Goods maintains an attractive P/E ratio of 11.79 alongside a dependable dividend yield of 2.82%, presenting a compelling investment opportunity.
Shares of Dick's Sporting Goods, Inc. (DKS) have been gradually approaching their 200-day simple moving average following the tragic school shooting in southern Florida on Valentine's Day. On February 28, the company announced it would cease selling assault-style rifles and prohibit firearm sales to anyone under 21 years old, sparking debate over Second Amendment rights. As of March 9, the stock closed at $31.92, reflecting a 2.5% decline since February 14. Before this incident, shares had climbed nearly 13% from the 2018 low of $28.86 recorded on February 6.
The stock currently trades in correction territory, down 10.1% from its January 23 peak of $35.50.
Analysts forecast Dick's Sporting Goods to report earnings per share between $1.20 and $1.23 when it releases its quarterly results before the market opens on Tuesday, March 13. Recent upward revisions in earnings estimates suggest a potential earnings beat, with particular attention on the company's commentary regarding firearm sales, especially rifles. (See also: BlackRock Challenges Gun Manufacturers and Retailers.)
Technical Analysis - Daily Chart
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The daily chart reveals a "golden cross" on March 7, where the 50-day simple moving average surpassed the 200-day SMA, signaling potential upward momentum ahead of earnings. The current 50-day and 200-day SMAs stand at $32.03 and $31.70, respectively. A key resistance level is identified at $47.90, while a support level is noted at $26.08, representing quarterly risk and semiannual value points.
Technical Analysis - Weekly Chart
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Last week, the weekly chart closed slightly negative; however, a positive earnings report could shift this trend. The stock finished just below its five-week modified moving average of $31.99 and remains significantly under its 200-week SMA of $45.50, a level last approached in May 2017 when the average was $49.93. The weekly slow stochastic indicator closed at 62.44, down from 67.86 on March 2. A close above $31.99 this week would upgrade the stock’s technical rating from neutral to potentially positive.
For those interested in mastering moving averages and chart analysis, refer to Chapter 2 of the Technical Analysis course at Investopedia Academy.
Based on this technical and fundamental analysis, investors are advised to consider purchasing Dick's Sporting Goods shares during price dips near the $26.08 semiannual value level, and to consider trimming positions when the stock approaches the 200-week SMA around $45.50, which gradually declines over time. (For further insights, see: In-Depth Look at Dick’s Updated Valuation.)
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