11:48 AM EDT, 03/15/2024 (MT Newswires) -- Dick's Sporting Goods' (DKS) sales are well above pre-pandemic levels, and margins have improved significantly, Morgan Stanley said in a note emailed Friday.

"[O]ur Overweight thesis has been predicated on our belief the stock is structurally undervalued if the business can retain the majority of its COVID-driven sales/margin gains," Morgan Stanley said, adding that given the company's strong fundamentals and market dominance, it deserves a higher earnings multiple, potentially in the mid- to high-teens range.

Morgan Stanley's analysis indicates that companies with stronger fundamentals may see a 20% to 30% rise in their next-twelve-months price-to-earnings ratios. This implies a target multiple of approximately 16x for Dick's Sporting Goods, the report said.

The company's sporting goods category remains strong, with forecasted growth of 1.2% to mid-single digits in 2024/2025, "we

believe the category can grow off of an elevated base, rather than reverting COVID-driven consumption," Morgan Stanley said.

Morgan Stanley aims for upper-end guidance in 2024, forecasting an EPS of about $13.25, with further growth to $14.55 in 2025, the report said.

Morgan Stanley maintained an overweight rating on Dick's Sporting Goods and raised its price target to $235 from $160.

Price: 211.35, Change: -5.46, Percent Change: -2.52