The sell-side activity has been robust for Dick’s Sporting Goods (NYSE: DKS) over the past 12 months and it is capping gains for the stock. Insiders, institutions and short-sellers are using the $115 level as a ceiling that has the stock trapped in a range that has persisted since the late summer. The takeaway is that Q3 results were much better than anyone expected and that may change the outlook for the stock. The analysts, all 20 of them covering the stock, rate it a Moderate Buy so there is support for the stock at the bottom of the range. The consensus sentiment and price target are both steady over the past year as well, the analysts have not faltered in their support, and they see this stock trading above the current range and about 15% higher than the pre-earnings price action.
The insiders and institutions, on the other hand, have been selling or at least rotating out of the stock over the past year. The insider activity is relatively flat but that is due to a massive purchase at the end of 2021 by a director which is offset by sustained and regular sales by a bevy of insiders in the time since. The institutions still own about 79% of the company but they have been net sellers for 5 of the last 7 quarters and that activity hit a peak in the early portion of calendar Q3 2022. Selling topped $2.27 billion prior to the Q3 release, about $1.777 billion net of buying, which is equal to about 20% of the market cap and a significant headwind for the market.
Dick’s Sporting Goods Knocks It Out Of The Park, Again
One thing that can be said about Dick’s Sporting Goods is that it has consistently outperformed its expectations over the past couple of years. The Q3 report is no different with revenue and earnings coming in far ahead of expectations on a better-than-expected comp store figure. Revenue of $2.69 billion beat by 960 basis points on a comp figure that not only negated the expected loss but grew 6.5% versus the prior year. Margins also expanded with EBT margin up more than 300% versus the prepandemic period and driving a sizeable increase in earnings. The company’s $2.60 in adjusted EPS is down on a YOY basis but up 400% versus 2019 and more than 1500 basis points ahead of the consensus.
The real story is that guidance was raised and that may help spark some short covering. The company raised its guidance for comp store sales to -3% at the low end compared to a prior expectation of -6% and there is upward movement on the bottom line as well. Adjusted earnings are now expected to be $10.50 at the low end of the range compared to the prior range of $8.85 to $10.55 and this could be cautious given the company’s momentum. In regard to the short interest, the short sellers have been helping to keep share prices in their range and have the short interest hovering up around 25% ahead of the earnings release. If this trend persists it may be difficult for the market to move above its current range.
The Technical Outlook: Range Bound Dick’s Winds Up For Next Move
The price action in Dick’s Sporting Goods is range bound but winding up for the next move. Eventually, either the bulls or the bears will win and this market will move outside of its range. Assuming the company continues to outperform as it has, it and its aggressively growing dividend will take the market up to new highs. The current consensus is near $124 but it could move higher as results roll in. If not, this stock could remain range bound at these levels until the institutions and insiders find a reason to start buying it again.