Dick’s Reports EPS Beat, Stock Sells Off On News

Dick’s Sporting Goods Inc., (Ticker Symbol: DKS) released its quarterly earnings before the opening bell on Wednesday.  The sporting goods retailer announced an earnings per share beat of .62 cents per share vs. Wall Street analysts’ expectations of .58 cents per share.  Dick’s reported a net income of $57.5 million vs. $60.1 million in the first quarter a year ago. However, sales did increase slightly to $1.92 billion vs. Wall Street analysts’ expectations of $1.9 billion.  Dick’s is seeing an uptick in its online activity from its customers, as sales online were up 15% in the quarter.

After a high school shooting in Florida in 2018, Dick’s decided, in March of 2019, to stop selling assault rifles and high-capacity magazines.  The decision was made after reports indicated that the shooter had purchased the weapon used in the attack from a Dick’s Sporting Goods location. At that time, Dick’s also banned gun sales to customers under the age of 21. The company’s hunting sales have suffered since the transition but they are making up for it in other departments.  Dick’s has recently had strong sales in its outdoor equipment which is helping offset the lackluster sales in hunting goods.

Above is a three-year chart of Dick’s Sporting Goods stock.  Dick’s had a great run in 2016, trading in a solid uptrend, and rallying over the course of the year, from low to high, over 70%.  The stock ticked to an all-time high of $62.88 on November 14th, 2016. During that time, Dick’s put in a Double Top formation. Traders and investors sometimes look at Double Top patterns for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Dick’s case.  The stock proceeded to sell off, breaking below its 2016 uptrend.

The stock spent the majority of 2017 in a steep downtrend. Dick’s stock retraced back over 100%, before finding support just below the $25.00 level.  Dick’s began to bottom, forming a bullish divergence pattern, as indicated on the chart by the purple squares, where the stock makes a lower low in price but the Relative Strength Index makes a higher low. Traders sometimes look at divergences for a possible pause within the current trend, which occurred in Dick’s case. Since then the stock has spent the last 18 months in a trading range between $41.00 and $29.00, as indicated by the red lines on the chart.  

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 10 analysts offering 12-month price targets, the average price target for Dick’s Sporting Goods stock is $37.50.  Compared to that average, the stock is priced at a discount relative to Wall Street’s analysts, currently trading at $33.82.

Dick’s stock over the past three years has given investors quite the rollercoaster ride.  The stock did see positive results in its online sales this quarter, which has been a large growth trend for most retailers.  Investors should keep their eyes on the trading range mentioned above and watch out for breakouts above $41.00 and breakdowns below $29.00 for fresh moves in Dick’s stock price.   


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