Finish Line Inc (FINL): Uh Oh, Downside Risk Caught a Bear

Piper Jaffray steps down from the sidelines amid hurricane haze, bracing for rocky 3Q results from FINL.


Finish Line Inc (NASDAQ:FINL) shares are stumbling almost 4% after investors caught wind of Piper Jaffray analyst Erinn Murphy‘s sudden bearish insight into the athletic apparel maker’s opportunity.

Between Hurricane Harvey and Hurricane Irma wreaking havoc, Finish Line’s stores have certainly taken a hit- and subsequently, Murphy finds near-term opportunity skirting downside potential ahead of the retail’s third quarter print.

In reaction, the analyst downgrades from a Neutral to an Underweight rating on FINL stock with an $8 price target, which represents a close to 21% downside from current levels. (To watch Murphy’s track record, click here)

Highlighting considerable risk to Finish Line meeting third quarter expectations “given above-avg exposure to hurricane impacted states,” even considering that on August 28th, the company had pre-announced second quarter results and guided down third quarter estimates along with its outlook for 2018, the analyst notes, “In Houston, stores were closed 4-5 days initially and had limited hours in the following week. Further, we believe (and see it first hand in Houston) that the retail sentiment remains poor. With Hurricane Irma, the impact has been broader across the state of Florida where FINL has 12% of its stores.” While the FINL team may have added Harvey into the mix of expectations, the analyst wagers the same cannot be said of Irma in the revised third quarter guide.

Murphy concludes: “Tying back to our broader call we made last week on the athletic space, we note that in 1H, 119% of all athletic dollar growth in North America came from vendor DTC which we view as an ongoing threat to the multi-branded athletic retailers who are now firmly in comp-negative territory. From a near-term perspective, we believe the ongoing impacts of Hurricane Harvey & Hurricane Irma could cause further pressure to Q3’s comp & earnings estimates given FINL’s above-average exposure to this regions. To wit, FINL has 27% of its store base in FL & TX combined which could impact comps further by 150-200 bps (conservative).”

For 2019, the analyst is maintaining her far more bearish projection of $0.30 in EPS against the Street’s $0.67.

Not everyone on the Street has turned to the bears quite yet, as TipRanks analytics showcase FINL as a Hold. Out of 10 analysts polled by TipRanks in the last 3 months, 2 are bullish on Finish Line stock, 4 remain sidelined, and 4 are bearish on the stock. With a loss potential of 13%, the stock’s consensus target price stands at $9.11.