JD Sports Fashion was sitting pretty at the top of the FTSE 100 on Friday as Berenberg said it was its “top pick” in consumer discretionary.
The bank, which reiterated its ‘buy’ rating and 1,100p price target on the stock, said the retailer demonstrated a “remarkable” recovery last year, significantly outperforming sports retail and brand peers, further demonstrating the strength and resilience of its brand and proposition.
“However, despite being perceived as a ‘lockdown winner’, it has not traded like one and with the shares remaining flat versus pre-pandemic levels, it has not traded like a ‘vaccine winner’ either,” Berenberg said.
“This is very surprising, since we would argue JD is best positioned for a strong and fast recovery given its regional mix and growing evidence of accelerating consumer demand for ‘sneakers’.”
Berenberg said it reckons JD is hugely underestimated as a reopening trade and there is significant upside risk to consensus forecasts from pent-up demand and attractive M&A optionality.
“JD looks cheap, in our view, for its quality and growth, offering a faster-growing and more diversified alternative to owning the sports brands, at a 40% discount.”
At 1225 BST, the shares were up 3.2% at 900.45p.
