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Yesterday (19 August), the JD Sports (LSE:JD) share price jumped by almost 7%. These types of moves are usually characterised by earnings releases, but that wasn’t the case for the retailer. Rather, it came from something completely different, which leads me to conclude that there could be more potential for the stock to rally from here.
Reason for the pop
Deutsche Bank gave JD Sports a strong boost yesterday by raising its price target on the stock from 85p to 100p. The bank’s analysts argued that the company’s risk-to-reward profile has improved. This refers to the amount the stock could rally relative to how much it could fall. The bank pointed to signs that the cycle of earnings downgrades may be coming to an end, as well as the potential for a renewed growth push from a key supplier, Nike.
They also highlighted improving confidence in JD’s management team. I get that it’s tough for a leadership team to navigate a business when there are problems. But Deutsche signalled optimism, based on the focus on strengthening operations and restoring investor trust after a difficult trading period. The upgrade not only signalled greater conviction in JD’s recovery prospects but also put the stock on the radar for investors to reassess the stock’s valuation.
Green shoots emerging
Even with the move higher, the stock is still down 27% over the past year. It’s true that the business still isn’t out of the woods yet when it comes to operations. Earlier in the year, the company scaled back its full-year profit forecast. It spoke about a “challenging and volatile” environment marked by softer consumer demand, especially in the UK and US, and increased promotional activity impacting gross margins.
Another ongoing issue is ongoing US tariffs. It proved serious enough that JD issued further warnings of continued volatility into fiscal 2026 and reduced its medium-term outlook. The company also announced plans to close around 50 stores as part of a broader restructuring effort, even as it pursued openings and conversions elsewhere.
Despite these issues, I think the stock has good value. The company has strong free cash flow and a net cash surplus exceeding £1bn. The strategic acquisitions, particularly Hibbett in the US and Courir in Europe, have broadened its footprint and revenue base. This provides stronger growth in regions outside its home market in the UK.
As Deutsche noted, the move from Nike could really help JD Sports going forward. Nike is resetting its strategy away from direct-to-consumer channels, which could benefit wholesale partners like JD. Let’s not forget Nike accounts for about 45% of JD’s revenues.
What the jump showed me
The size of the move yesterday indicates that the tide may be starting to turn for the share price. Optimism about the future could see a continued push higher in the stock in the coming months. This is especially true if other research teams upgrade their forecasts, or if JD releases a strong trading update. On that basis, I think it’s a stock for investors to consider.
