Mike Ashley has created a multi-billion pound business by selling sports product at discount prices – and there is good stuff they sell in amongst all the, let’s say, average merchandise.
After a nice rally to above 420, the shares have tanked to below the 2CentView stop of 360 – all because of an interview Ashley made with a journalist, where described the business as being in ‘big trouble’ – statements like this are not helpful and are also perhaps illegal, as such market sensitive information should be sent to the exchange not to journalists.
So Ashley’s Arrogance (AA) has landed the company into trouble again – the shares dropped to 32p in 2008 – and this partly due to this arrogance over a Financial Director. The company tried to mitigate the impact, but the damage has been done.
If you have bought the shares above 420, and have not sold, it may be worth extending the stop limit to 340, but no more – there is a chance the company could go private at a higher price or the AA factor could drag the stock down much lower.
Right Now Fair value is unchanged at 520, but Analysts are probably working revising their forecasts….
UK Discount retailer, Sports Direct dominates the sports retail in the UK, and has it’s sights on international expansion.
The Stock has halved since Sep 2015, as retail in general gets whacked, and has dropped 20% since the trading update on Jan 8th.
The market is very tough at the moment with all sectors getting hit. But this is the best time to BUY quality companies as they come at discount prices.
With good free cashflow, the price of 398 implies virtually zero growth, versus consensus growth of 9% giving a 2CentView fair value of 550.
Trade: Wait for stock to go back above 420, then pull the trigger, target 520, stop 360. If the stock continues to go much lower – we are missing something and will need revaluate i.e. it is something more than just a weak trading stateement due to warm weather.
Wish i had my system working 3 years ago when LON:SPD (Sports direct was at 70p!). Rightnow, at 680 it is priced fairly on an implied 5y Growth of 22%, PEG=1. So not expensive, if you like the stock long term, which dominates the discount sports retailer market!
So Have no specific strategy except if you like it buy it for the long term! I am waiting for the next $JD (JD Sports) type opportunity which i bought at 700 and now 1400! There will be another one so keep following 2centview.com!