Dicks Sporting Goods Inc (DKS), GameStop Corp. (GME), Applied Materials, Inc. (AMAT): Friday’s Top Upgrades (and Downgrades)

Page 1 of 2

Dicks Sporting Goods Inc (NYSE:DKS)This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines feature a lower price target for Dicks Sporting Goods Inc (NYSE:DKS), a higher one for GameStop Corp. (NYSE:GME), and for Applied Materials, Inc. (NASDAQ:AMAT) — an honest to goodness upgrade. Let’s tackle those in order, beginning with…

An unsporting downgrade for Dick’s
Sporting-goods superstore Dicks Sporting Goods Inc (NYSE:DKS) is slated to release third-quarter earnings Tuesday morning, but one analyst, at least, isn’t waiting around to get slapped upside the head with bad news. This morning, Canaccord Genuity announced that while it’s still technically in favor of “buying” Dicks Sporting Goods Inc (NYSE:DKS) stock, it’s going to hedge its bets going forward, and cut its price target to $58.

Given the raft of retailers reporting disappointing news lately, that’s probably prudent. But given Dicks Sporting Goods Inc (NYSE:DKS) financials in particular, you have to wonder why Canaccord didn’t go the extra step and officially downgrade its recommendation on the shares.

After all, while it’s certainly possible that Dick’s will surprise to the upside next week, its shares are looking especially vulnerable in the event an earnings disappointment should occur. Trading at 21 times earnings today, the shares cost more than their projected 15% growth rate would appear to warrant. Worse, the quality of Dicks Sporting Goods Inc (NYSE:DKS) earnings is also suspect. Trailing free cash flow at the retailer, which amounts to just $169 million, is barely half the $298 million the company has reported as GAAP “profits” for the past 12 months. As a result, Dick’s shares now carry a price-to-free cash flow ratio in excess of 37 times.

At this high of a valuation, one stumble and Dick’s shares could tumble.

Booting up for GameStop
A second specialty retailer poised to report next week – GameStop Corp. (NYSE:GME) — is getting an opposite reaction on Wall Street today, as analysts at Telsey Advisory Group up their price target on the stock to $58. That’s 26% more than Telsey used to think the stock was worth, but why?

Unlike Dicks Sporting Goods Inc (NYSE:DKS), GameStop Corp. (NYSE:GME) lacks a trailing P/E ratio to hang a valuation on, because… well, to be blunt, because GameStop Corp. (NYSE:GME) hasn’t been profitable in more than a year. But while the stock may lack GAAP profits, what GameStop does have is free cash flow. And it’s got that in abundance.

Over the past 12 months, GameStop Corp. (NYSE:GME) generated some $322 million in real cash profit from its business, belying the negative GAAP “earnings” number. That’s a big pile of cash pouring through the door. Problem is, the stock’s valuation is also quite high. GameStop shares flew up 165% over the past year, with the result being that the stock now sells for about 17.5 times free cash flow.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!