Foot Locker Stock Is Falling. It Just Lost Another Bull. | FL Message Board Posts


Foot Locker, Inc.

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Msg  10 of 11  at  3/28/2022 5:20:20 PM  by

jerrykrause


Foot Locker Stock Is Falling. It Just Lost Another Bull.

Foot Locker Stock Is Falling. It Just Lost Another Bull.
 

Foot Locker is falling on Monday, after it lost another bull.

Cowen & Co. analyst John Kernan cut his rating on Foot Locker (ticker: FL) to Market Perform from Outperform, and lowered his price target to $34 from $42.

He writes that the move comes after his review of the latest data on digital traffic and search trends, which has him concerned despite "cheap valuation."

Google search trends so far in 2022 are averaging down 14% year over year for Foot Locker, and are down more than 30% on a two-year pre-pandemic basis. He is concerned that without better online and brick-and-mortar traffic, it will be difficult for Foot Locker to take advantage of improved inventory in the second half of the year.

Kernan is also worried that ongoing inflationary costs—from supply chain to labor—may be more burdensome than the current consensus going into the back half of 2022 and into 2023. Moreover, this comes at a time when "[v]aluation for mall based businesses are converging at all-time lows, and we do not see a financial catalyst for change," he writes.

Foot Locker is down 4.5% to $29.13 in recent trading.

The stock has seen several downgrades since it warned that revenue would drop for the full year when it reported fourth-quarter results in late February as the company diversifies sales away from main supplier Nike (NKE). Roughly two-thirds of analysts who cover Foot Locker are now on the sidelines, according to data from FactSet.

Still Barron's has argued that the stock has gotten too cheap for those willing to bet that it can be more than just a Nike retailer. The shares change hands for less than 7 times forward earnings, well below their five-year average of nearly 10 times.

For his part, Kernan notes that he expects the company will be able to sustain between $300 million and $400 million in free cash flow, and repurchase $1.4 billion in stock through fiscal 2025. Given that the "dividend payout could rise materially as the share count is reduced" that could put a floor under the shares.

 


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