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Piper Sandler Turns Bearish On Foot Locker, Sees 24% Downside
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Piper Sandler Turns Bearish On Foot Locker, Sees 24% Downside

Piper Sandler downgraded Foot Locker’s rating to Sell from Hold and lifted the stock’s price target to $29 (24.2% downside potential) from $25, citing muted visibility over the near-term and pressure on the specialty athletic retailer’s direct-to-consumer business.

Piper Sandler analyst Erinn Murphy said that “we see muted near-term
visibility as COVID cases accelerate into year-end around the globe.” In addition, Murphy said that over the longer term, “the ongoing shift to digital will pressure FL’s ability to recover to pre-COVID operating margins.”

Last week, Foot Locker (FL) reported stronger-than-expected 3Q earnings. Its EPS of $1.21 came well ahead of analysts’ expectations of $0.60. 3Q revenues of $2.11 billion also beat the Street consensus of $1.94 billion. However, the company said during the earnings call that over 10% of its stores were closed, primarily in Europe due to pandemic-led lockdowns.

Meanwhile, Foot Locker’s CEO Richard Johnson said “Although the back-to-school selling season kicked in later than usual due to COVID-19-related delays, momentum built as the quarter progressed, and we were pleased with our customers’ continued strong engagement across our family of brands.” (See FL stock analysis on TipRanks)

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 10 Buys, 4 Holds and 1 Sell. The average price target stands at $42.27 and implies upside potential of about 10.5% to current levels. Shares are down by 1.9% year-to-date.

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