Buy the Dip on This Retailer Before Earnings

DKS' pullback from record highs could present a buying opportunity

Deputy Editor
May 21, 2024 at 2:32 PM
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Dick's Sporting Goods Inc (NYSE:DKS) was last seen down 2.7% to trade at $188.58, after Wedbush reiterated its "neutral" rating and TD Cowen cut its price target by $2 to $224. The specialty retailer has taken a 16.6% haircut off its April 1 record high of $225.79, but, as contrarian signals mount, could be poised to finish May with a flourish. 

Dick's is set to report earnings on May 29, before the market opens. After the last eight reports, DKS closed higher in six of the following sessions, including a 15.5% pop this past March. This time around, the options pits are pricing in a next-day swing of 11.3%, slightly larger than the 9.4% move the stock has averaged over the last two years. 

The retail stock's recent drawdown has DKS testing a historically bullish trendline.  Per Schaeffer's Senior Quantitative Analyst Rocky White, the security has come within one standard deviation of its 80-day moving average four times over the past three years, defined for this study as having traded north of this trendline 80% of the time in the past two months, and in eight of the past 10 trading days. One month later, the stock was higher 75% of the time after these signals, averaging a 5.8% return. 

DKS also has plenty of short squeeze potential. Short interest represents 10.1% of the stock's available float, and would take shorts nearly five days to cover at its average pace of trading. 

DKS May21


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