Formal Coverage: Big Five Sporting Goods, Cabela's, Dick's Sporting Goods, Callaway Golf, Hibbett Sports, MarineMax, Sportsman's Warehouse, West Marine

1. OUR FORMAL COVERAGE
Top Portfolio Recommendations
(And Stocks to Avoid)
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OUR FORMAL COVERAGE
TICKER NAME RATING & VIEW
BGFV
Big 5 Sporting
Goods
Hold. $14 price target. Big 5 Sporting Goods enjoyed a strong 2Q. The
company’s revenue and diluted EPS beat the Wall Street consensus, and
headwinds from competitors’ liquidations are subsiding. These liquidations
likely explain why the firm’s comps fell 1.7% y/y in 2Q. A fresh $25M buyback
plan was good news, too. Still, the post-earnings bounce likely squeezed out
any potential alpha. We do like the over 3% dividend yield, but unless you’re a
conservative income-oriented investor, we don’t recommend buying yet.
CAB Cabela’s
Buy. $58 price target. To sell the business or not to sell the business, that is
the question! We understand that bidding for Cabela’s has ended, with Bass Pro
Shops likely the only remaining suitor for Cabela’s merchandising operations.
(Separate offers were accepted for the firm’s financial services unit.)
Ultimately, we believe that Cabela’s will be acquired, but this waiting game is
rather tiresome. The stock would be valued much lower without the M&A
discussions. With patience, though, investors should be able to make profits
from the sale of Cabela’s.
DKS
Dick’s Sporting
Goods
Buy. $64 price target. Dick’s Sporting Goods is the stock that just keeps on
giving. The good news for investors is that the profits aren’t all behind us yet.
The temporary noise from the Sports Authority and Sports Chalet liquidations
are in the past, though, giving Dick’s Sporting Goods the visibility to raise full-
year guidance. Other than disappointing Golf Galaxy revenue, there’s not much
holding the company back. We like the shares at the current price and forecast
a strong 2016 holiday season for Dick’s Sporting Goods. Currently, 2017 is
looking great, too. Just buy the stock.
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3. TICKER NAME RATING & VIEW
ELY Callaway Golf
Buy. $14.50 price target. It seems as if writing obituaries for the game of golf
has become a popular subject for American sportswriters with nothing else to
discuss. (“I don’t have anything for my next deadline… I’ll write about golf
disappearing!”) We’re not so pessimistic. Callaway Golf is blessed to operate in
a sector with declining competition, and it’s highly unlikely that any major
sporting goods manufacturer will suddenly dive into golf. Callaway is the only
publicly-traded pure-play golf equipment manufacturer, at least until Acushnet
IPOs. We like this value stock and think it’s a birdie for your portfolio.
HIBB Hibbett Sports
Hold. $40 price target. We’re still very impressed with the Hibbett Sports
retail operations. They’re innovative and provide a healthy small-market
growth platform. The margins remain healthy, too. Unfortunately, the
company’s e-commerce sales to date equal $0.00. That is a business strategy
misstep we can’t ignore. We’re very happy that Hibbett Sports will begin to sell
online in 4Q, with full systems online in 2017, but they’re rather late to the
party. Until we can both assess the company’s e-commerce technology and
better understand its growth potential, we’ll keep the Hold rating.
HZO MarineMax
Buy. $25 price target. All aboard for profits! In 2Q, MarineMax sold yachts
faster than some retailers could sell toy boats: Comps jumped 44%. While the
industry’s sales softened slightly in July, MarineMax regularly exceeds the
sector’s growth rate. A repeat of 44% y/y same-store (or dealership) sales
improvement is unlikely, but MarineMax is focused on the best segments of the
marine business: high-end yachts and saltwater fishing boats. Buying this
under-the-radar stock now will make you look smart next year, and you might
be able to afford your own yacht soon. Happy sailing.
SPWH
Sportsman’s
Warehouse
Hold. $12 price target. Our Director of Research would like to admit that he
was wrong about Sportsman’s Warehouse. The stock bounced nicely from its
weak period, and the firm’s true warehouse environment is effectively keeping
prices low. While you’re not going to visit a Sportsman’s Warehouse for the
experience, customers are coming to buy outdoor gear at better deals than Bass
Pro Shops and Cabela’s can offer. (They have to pay for those giant in-store
aquariums somehow.) While we’re not yet prepared to award a coveted
Forward View Buy rating, Sportsman’s Warehouse could get there in the future.
WMAR West Marine
Hold. $9 price target. West Marine is a micro-cap stock currently in choppy
waters. The company’s ongoing transition from a boat parts and accessories
retailer to one centered on all aspects of the “water life” has been successful
thus far. There’s just too much legacy West Marine business for the fresh retail
model to generate overall growth. We’ve not seen any catalyst yet that would
send the shares higher. It’s not a bad company at all, however we’re currently
forecasting sluggish revenue improvement through 2017. If you’re interested
in a boating investment, buy MarineMax instead.
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4. Disclaimers & Disclosures
Analyst Certification: I, Nathan Yates, certify that the views expressed in this publication accurately reflect my personal
views about the subject companies and their securities. I also certify that I have not, am not, and will not be compensated
directly or indirectly in exchange for expressing any specific recommendation in this report.
Recommendation Expected Return
Buy Shares are expected to deliver alpha
Hold Shares are expected to match the market's risk-adjusted return
Sell Shares are expected to underperform the market
Required Disclosures: Nathan Yates may or may not own long or short positions in securities mentioned in this report. As a
matter of principal and ethics, he will not trade for three days in any security to be mentioned in any report. Occasionally, the
time gap between a personal trade and an unanticipated event may be less. There is no known affiliate ownership in subject
companies of this report. The firm does seek to sell research descriptions to publication corporations. No other known
conflicts exist.
Important Disclosures: Forward View Consulting employs various equity valuation methodologies to develop investment
ratings, target prices and conclusions. Certain risks to our ratings, target prices and ultimate investment conclusions exist
which include, without limitation, a company’s failure to achieve financial results, product risk, regulatory risk, general market
conditions and volatility, interest rates, political factors, acts of God, terrorist activities and changing economic conditions.
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