JD Sports Shares Trade at ‘Unwarranted’ FCF Yield Premium – Deutsche Bank

JD Sports Fashion shares fell more than 4% Monday after analysts at Deutsche Bank downgraded the stock to Sell from Hold, lowering the price target to 110p from 115p a share.

According to the investment bank, JD Sports shares are currently trading at an “unwarranted” free cash flow yield premium to peers based on “subdued” category spending.

“Whilst the shares appear cheap vs history and relative to peers on a PE basis, a peer average Cal-25 7.5% FCF yield drives our 110p TP,” explained the firm.

JD Sports shares fell to 120.35p in Monday's session, down 4.07%. This year, they have fallen by more than 27%.

Furthermore, the analysts cited the cost of growing the business as another factor for the downgrade.

The bank says that JD's profit and loss suggests a margin for low single digit growth in operating expenditures when considering depreciation and amortisation expenses and provision releases.

Space growth and cost inflation were forecasted to rise at mid-single-digit rates. This resulted in a 350 basis point gap between depreciation and amortization, and capex.

“This is evident in deteriorating cash conversion, and as it inevitably closes with time, will present a headwind to margins,” added Deutsche Bank.

The bank also forecasts flat like-for-like sales growth for the 2025 fiscal year, compared to JD's guidance of 1% to 4% growth.