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What's the Next Play for Hibbett Sports Stock?

HIBB has been on a rapid run up the charts in the last 12 months

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Earnings season might be wrapping up, but there are still a few stragglers to report. One such name is sports retailer Hibbett Sports, Inc. (NASDAQ:HIBB), set to step up to the earnings plate before the open on Friday, March 5. Ahead of the event, the stock is looking to continue its torrid run up the charts.

To put HIBB's absurd performance in perspective, the stock was trading at $7.33 on March 23. On Feb. 21, the shares scored a record high of $70.76. More gains could be in the future thanks to a short squeeze. Short interest fell off by nearly 17% in the two most recent reporting periods. Yet the 2.78 million shares sold short accounts for a healthy 17% of HIBB's total available float. At the stock's average pace of trading, it would take shorts more than a week to buy back their bearish bets.

Looking at HIBB's earnings history is another positive. In the last eight quarters, the stock has scored a positive post-earnings move five times, including a 7.8% pop back in August and a 20.9% gain back in May 2019. For Friday, the options market is pricing in a larger-than-usual post-earnings move of 13.9%, regardless of direction.

Hibbett Sports stock has been on an incredible bull run that could continue in the short-term, but likely won’t produce the highest returns at its current valuation. Although HIBB's price-earnings ratio of 20.02 isn’t awful, the stock's forward price-earnings of 31.75 is exaggeratedly high for a small retailer with a history of modest growth.

Nonetheless, Hibbett Sports saw a surge in revenue and net income growth over the past year, adding over $150 million to its revenue totals and more than doubling its net income. In addition, on Feb. 10, the company released a preliminary report, where it highlighted a fourth quarter sales increase of 21.9% and a full year sales increase of 22.2%. Thus at its current valuation, Hibbett Sports stock presents the most opportunity as a long-term play.

 

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