Shares in Foot Locker plunged 8.8% Friday after the shoe seller posted mixed quarterly results wherein sales fell short of Wall Street expectations. Here’s how to trade the move.
Shares in Foot Locker, Inc. (FL) plunged 8.8% Friday after the shoe seller posted mixed quarterly results wherein sales fell short of Wall Street expectations.
The mall-based retailer disclosed fourth quarter (Q4) revenues of $2.22 billion, with the figure missing analysts’ expectations by 0.71% and coming in below year-ago sales of $2.27 billion. Investors were also troubled by the company’s comparable store sales, which slumped 2.7% during the quarter versus expectations of a 4.9% increase. Foot Locker still has around 10% of its stores closed due to the pandemic.
In better news, the company’s bottom line grew 4.5% from a year earlier, helped by a 44% jump in online sales and improved margins. “Our digital business remained the catalyst through the quarter, delivering impressive double-digit growth overall with strengths across the board. In regions most heavily impacted by store closures, digital growth was up triple-digits. In fact, in Europe, COVID-related restrictions have been an accelerator for digital capability and growth,” CEO Dick Johnson told investors, per Yahoo! Finance.
Through Friday’s close, Foot Locker stock has a market capitalization of $5 billion, offers a 1.66% dividend yield, and trades up 18.92% on the year. Over the past 12 months, the shares have gained over 40%.
Wall Street View
Last month, Cowen analyst John Kernan upped the investment firm’s price target on the stock to $66 from $55 while keeping his ‘Outperform’ recommendation. Kernan believes expectations are too low and valuation appears too cheap given ongoing government stimulus measures designed to encourage consumer spending.
Brokerage coverage elsewhere also remains mostly bullish. The stock receives 14 ‘Buy’ ratings, 7 ‘Hold’ ratings, and just 1 ‘Sell’ rating. As of March 1, the stock trades at a 15% discount to Wall Street’s 12-month median price target of $55.50.
Technical Outlook and Trading Tactics
Foot Locker shares have remained in a steady uptrend since bottoming out at the height of the March 2020 pandemic sell-off. Furthermore, a cross of the 50-day simple moving average (SMA) above the 200-day SMA in late September – referred to as a “golden cross” – confirmed the bullish price action.
Active traders should view the current earnings-driven weakness as a buying opportunity. Look to enter near $46, where the price finds a confluence of support from a multi-year trendline and the 50-day SMA. Those who take a trade should consider placing a stop-loss order under the January swing low at $42.69 and targeting a move to crucial overhead resistance at $64.