Dick's Sporting Goods (DKS) market cap decline following the announcement of a proposed Foot Locker (FL) acquisition appears "overblown" and despite its complexity, the deal supports long-term growth through customer reach, scale, and vendor leverage, Truist Securities said in a note on Tuesday.
The transaction raises concerns about slowing momentum in Dick's Sporting's core business, but the company is committed to its original growth strategy, with no planned delays or reliance on cost synergies, according to the note.
"We believe they saw an opportunity to acquire a business that's earning far below its potential due to current brand headwinds at Nike (NKE)," Truist said.
The firm thinks that Foot Locker's international footprint was not a key motivation for the acquisition and Dick's Sporting is more focused on expanding its urban customer base and vendor partnerships.
Truist kept stock rating on Dick's Sporting at buy with a $245 price target.
Price: 183.17, Change: +0.34, Percent Change: +0.19
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