JD Sports Fashion PLC (LSE:JD.) shares topped the FTSE 100 risers on Monday morning, boosted by an upgrade from Deutsche Bank, which removed its 'sell' rating.
In reaction to the third-quarter update, the stock fell 15% on top of a 20% decline since the interim results pulling the shares below 100p for the first time since 2022, but with UBS analysts voicing optimism about the important current festive quarter.
Guidance for profits at the low end of the previous outlook range was below consensus, "however the update shook what was already somewhat fragile confidence", said Deutsche analyst Alison Lygo, with US like-for-like sales turning negative having a "particular impact".
Her take is a reinforcement of two of existing views: firstly, "that JD is more 'in the pack' in US retail than has perhaps been appreciated, and secondly, that there may be room for improvement, and reason to be cautious, on near term visibility of trading".
Looking back, a profit warning in January was blamed on elevated promotional activity and Lygo said "we do question where the tipping point is for maintaining discipline on promo intensity for a retailer of 3P branded product, and how trading strategy for FY26 will evolve".
She upgraded to a 'hold' rating and kept her target price unchanged at 110p, compared to a last close price of 93.46p.
UBS analyst Robert Krankowski also commented, saying the reduction in its profit guidance and management's commentary "raised concerns about the remainder of 2024 as well as the outlook for 2025".
"Consequently, for the first time since 2022, JD Sports is trading below 100p, prompting many investors to question whether the stock will recover soon."
But in his view, Q4 is likely to be a "solid" quarter and as it makes up 35-40% of annual profits will support a near-term rebound.
"However, the Q3 update may have capped its valuation in the near-term below 10x P/E due to:(1) JD Sports multi-brand model failing to be more predictable in a volatile environment; (2) the lack of clarity on timing of Nike's recovery; and (3) ongoing debates about accounting quality, which could deter long-term investors."
** Update: adds UBS comment **