JD Sports Shares Reverse Course, 20% Up off Lows

JD Sports's shares (LON: JD) are following up yesterday's impressive 9.5% gain in price following positive trading results with a further 9% through the early part of this morning's session. Now more than 20% off the lows, could it be that the stock is still considered cheap?

Since the start of this year, JD Sports shares have fallen 21.15%, even allowing for the recent rally. The decline is even more pronounced over the past year, where the stock has shed 39.55% to be trading near decade lows. Profit warnings, margin pressures, struggling consumers, rising costs, and potential trade tariffs have all added to the downward sentiment in recent times, with bulls no doubt breathing a sigh of relief after the recent shift.

In its latest update, JD Sports reported organic revenue growth of 5.8% for the full year, surpassing expectations. Additionally, the company's recent acquisitions, Hibbett and Courir, are performing in line with projections. JD Sports forecasts full-year profits before tax to range between £915 million and £935 million. However, the company did encounter a slight decrease in gross margins, down 20 basis points to 47.8%.

Going forward, JD Sports plans to expand its retail footprint by opening 150 new stores, upgrading 100 existing ones, and closing around 50 underperforming outlets. Furthermore, the company has announced a £100 million share buyback program.

Analysts have set a median price target for JD Sports at 118p, indicating significant perceived upside from its current trading price, yet as we know, these targets can shift in a moment. The high bar of 200, set against the low of 85 presents a positive risk/reward balance according to the street, but with volatility remaining high, prudent risk management is needed in any position.