Dick's Sporting Goods Stock: Cheap Despite Rifle Sales

Shares of Dick's Sporting Goods, Inc. (DKS) have been inching down toward their 200-day simple moving average following the Valentines Day school shooting in southern Florida. On Feb. 28, the retailer said it will no longer sell assault-style rifles, and it will bar sales of any firearm to anyone under 21 years of age, fueling criticism over supposed Second Amendment violations. The stock closed March 9, at $31.92, down 2.5% since Feb. 14. Prior to the shooting, the shares had gained almost 13% from their 2018 low of $28.86 on Feb. 6. 

The stock is in correction territory at 10.1% below its Jan. 23 high of $35.50.

Analysts expect Dick's Sporting Goods to post earnings per share of $1.20 to $1.23 when the company reports results before the opening bell on Tuesday, March 13. Analysts have recently upped their estimates and thus favor an earnings beat. We will see if the company comments on gun sales, specifically for rifles. (See also: BlackRock Poses Tough Questions for Gunmakers and Sellers.)

The daily chart for Dick's Sporting Goods

Daily technical chart showing the performance of Dick's Sporting Goods, Inc. (DKS) stock
Courtesy of MetaStock Xenith

The daily chart shows that Dick's Sporting Goods stock had a "golden cross" on March 7, as the 50-day simple moving average rose above the 200-day simple moving average. This indication that higher prices lie ahead is a positive backdrop for the stock ahead of earnings. The 50-day and 200-day simple moving averages are $32.03 and $31.70, respectively. The horizontal line well above the market price at $47.90 is my quarterly risky level, and the horizontal below the market price at $26.08 is my semiannual value level.

The weekly chart for Dick's Sporting Goods

Weekly technical chart showing the performance of Dick's Sporting Goods, Inc. (DKS) stock
Courtesy of MetaStock Xenith

The weekly chart for Dick's Sporting Goods ended last week negative, but that will change if there is a positive reaction to earnings. The stock ended last week pennies below its five-week modified moving average of $31.99. The stock is well below its 200-week simple moving average of $45.50, which is the "reversion to the mean," last crossed during the week of May 12, 2017, when the average was $49.93. The 12 x 3 x 3 weekly slow stochastic reading ended last week 62.44, down from 67.86 on March 2. A close this week above $31.99 would thus result in a technical upgrade to neutral and perhaps to positive.

(If you are interested in learning to use moving averages in chart analysis, check out Chapter 2 of the Technical Analysis course on the Investopedia Academy)

Given these charts and analysis, investors should buy shares of Dick's Sporting Goods on weakness to my semiannual value level of $26.08 and reduce holdings on strength to the 200-week simple moving average at $45.50 and declining each week. (For more, see: Looking Deeper at Dick's New Valuation.)

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