Dick's Sporting Goods' (DKS) growth investments will keep gross margin relatively stable in 2026, while underlying business momentum remains strong, supported by key brand partners and its omnichannel model, Morgan Stanley said Friday in a note.

The brokerage said the company's focus on improving in-store experience through its House of Sport format, scaling omnichannel capabilities, building out GameChanger and its media network will strengthen market share and operating margins over the long-term.

While restoring Foot Locker profitability is taking longer than planned, Morgan Stanley said it believes the 'Fast Break' initiative is promising. The firm said there is significant upside if the turnaround gains traction, with potential for earnings per share accretion.

The first half of 2026 will have stronger topline growth and investments in brand support, resulting in lower profits year over year, while the situation will reverse in the second half, according to the report.

The firm raised Dick's consolidated comp estimates to 2.8% and 2.7% for 2026 and 2027, versus 1.6% and 2.7% previously. Morgan Stanley's new adjusted EPS estimates are $14.33 and $15.38 for 2026 and 2027, compared with earlier estimates of $15.21 and $16.37.

The firm reiterated an overweight rating on Dick's Sporting Goods and lowered the price target to $250 from $260.

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