After JD Sports Fashion PLC (LSE:JD.) warned of slower growth, Barclays said this should only be a short-term weakness.
The bank sees strong long-term potential especially with the potential "catalyst" of the retailer clearing up its subsidiary ownerships.
Analysts at the bank said the FTSE 100 sports chain, which fell on Tuesday after a warning on recent softness in North American sales, was recently negotiating on the future ownership of Iberian Sports Retail Group, while it must wait until 2025 to purchase the remaining 20% of Genesis in the US.
“We believe these changes could act as a catalyst to drive a re-rating in the shares,” the analysts said.
They said a tidying up of its subsidiaries should also likely be accretive to earnings per share.
JD Sports has also normalised its inventory levels across all its markets excluding the US, while competitors have lagged.
Barclays acknowledged that this does, however, leave the retailer at risk of being forced into discounting should the likes of Adidas and Nike decide to cut prices to get rid of excess stock.
While the short-term will be impacted by market sentiment, with JD themselves acknowledging a slowdown in the US, this “does not change the longer-term thesis” for Barclays.
JD Sports had its target price-clipped by the broker, down to 210p from 215p, although Barclays kept its ‘overweight’ rating on the stock.