Sporting goods stocks, that are part of the consumer discretionary sector, have been among the best-performing stocks since the onset of the Covid-19 pandemic. But with many of these stocks showing phenomenal gains, the question is if it’s time for fitness stocks to take a cool down period.
The bearish argument is that as the economy reopens, many Americans will go back to gyms and fitness centers. That will take the steam away from the demand for home fitness equipment. Also, analysts are concerned that demand for exercise apparel and other workout gear has reached critical mass.
And for their part, it appears that some sporting goods companies are forecasting a slower rate of growth in 2021. This is particularly true because they will face difficult comparisons with the pandemic fueled revenue rates of 2020.
However, habits have a funny way of sticking around. Homes have been remodeled to accommodate at-home workouts. New habits have been established. Plus, youth sports are now back in season. And as we get into late summer, that should accelerate as the fall sports season kicks off. Sporting goods stores have, out of necessity, pivoted to an omnichannel model that is likely to hold up well.
Nevertheless, like any sector, quality still matters. And here are three of the sporting goods stocks that still have legs.
Dick’s Sporting Goods (DKS)
Dick’s Sporting Goods (NYSE:DKS) stock is up 77% in 2021 and is up a whopping 155% in the 12-month period ending on June 14. And on the heels of a strong earnings report, DKS stock is up 13% in the last month.
One reason that Dick's Sporting Goods tops this list is that it is adopting an experiential House of Sport store-in-store concept that gives consumers a reason beyond price to choose the retailer. This idea of creating an in-store experience is also found at the company’s Golf Galaxy spin-offs. The pandemic is rekindling interest in the sport, and Dick’s is pledging to spend $20 million to capitalize on the renaissance in golf equipment.
The analyst’s outlook is a bit tricky. Overall, DKS stock has a 12-month price target of $88.05 which is over 10% below its current price. However, the company has received several recent price target upgrades, which suggests an overall bullish outlook for the stock.
Deckers Outdoor (DECK)
Deckers Outdoor (NYSE:DECK) is a designer and distributor of niche footwear perhaps best known nationally as the manufacturer of the iconic UGG brand. The company is also benefiting from surging sales of its HOKA ONE running shoe.
DECK stock is up 18% in 2021 and is up 73% in the last 12 months. However with the stock at an all-time high level, it’s fair for investors to wonder if the run is at a peak.
Not so, say the analysts who give DECK stock a price target of $370 which is an additional 10% above its current price. If that’s not enough to whet your appetite consider that recent analyst reports have price targets that are significantly higher.
Sportsman’s Warehouse (SPWH)
Sportsman’s Warehouse (NASDAQ:SPWH) is a laggard among sporting goods stocks. SPWH stock has “only” posted a 41% gain in the last 12 months. And the stock is essentially flat in 2021.
But with the stock around its 52-week high the stock price is consolidating and, from a technical standpoint, may be ready for a bullish break to the upside. Analysts give the stock an upside of approximately 12.5%. Investors should also be encouraged by the fact that the company delivered earnings and revenue that were higher than the same quarter in 2020.
The bullish case for SPWH stock has to do with its focus on outdoor activities such as camping and fishing. These are two activities that, despite seemingly allowing an appropriate social distance, were curtailed in some regions due to pandemic mitigation efforts. The company looks to benefit as many outdoor enthusiasts get back to nature.
Before you consider DICK'S Sporting Goods, you'll want to hear this.
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