Broker snap: JD Sports oversold, 'buy' says Seymour Pierce

14th Jan 2013 10:11

Seymour Pierce has reiterated its 'buy' recommendation and 1,000p target price for JD Sports, saying that while Blacks continues to struggle, shares are cheap.The broker said that the High Street sports apparel group's Christmas trading update was disappointing but not a surprise as the miss came from last year's acquisition of Blacks Leisure.Seymour Pierce now expects Blacks to report an operating loss of £14m, £2m higher than its pre-Christmas forecast."Management is now under pressure to reduce losses at Blacks and to sell off the loss making fashion fascias. Any faltering in these goals, could prompt an opportunistic bid from majority owner, Pentland, we believe."Elsewhere, sales in the core sports fascia business were better-than-expected but this was offset by a poor performance from the fashion fascias, the Bank chain in particular.As such, Seymour Pierce has reduced its full-year pre-tax profit forecast from £62.5m to £61m for the year ending January 2013. The 2014 forecast have been cut from £74m to £72m."Although we are yet to be persuaded on the Blacks' recovery plans, we believe JD Sports, which has underperformed the sector by c.20%, is oversold. On our revised forecasts, the stock is now valued at 7.9 times FY13 earnings declining to 6.6 times in the following year."JD is the lowest rated of all stocks in Seymour Pierce's coverage.Shares were up 3.17% at 702.1p by 10:01.BC