ASO | New Long Idea. 30%-50% Upside. Bull Case to $40 (60% upside). Academy Sports & Outdoors (ASO) onto Long Bias list as we see both earnings and multiple upside. Not a multi-year, multi-bagger like some of our other ideas, but it has sales and margin levers that competitors like DKS do not – not the least of which is outsized guns & ammo and team sports exposure. DKS seems like the obvious pair – which we’re not averse to -- but we think HIBB is a much more compelling pair given that management just raised guidance by 40%, it faces daunting comps and likely earnings downside on the year. Our top end $4 in EPS would mean a stock of $40-$48 or 20%-35% downside.
Carter’s (CRI) | Removing from Long Bias list. The reality is that we’re looking at a ‘Covid baby bust’. Monthly data from December 2020 for five states, including California and Florida, show that births fell by more than 50,000 compared to a year earlier. This is actually spot-on with comments from Neil Howe, Hedgeye’s Demographer, back in August that the US birth rate is likely to fall by 10% in 2021 compared to 2019, which would in turn bring US population growth yy to a full stop mid-year 2021 for the first time in US history. Crudely extrapolated out to all fifty states (these five represent about 25% of the national population), the missing 50K births imply roughly 200K fewer births nationally. This would represent a 5.3% decline in total births in 2020. Extremely bearish for CRI, who’s top line in it’s core Baby business (where it dominates the market) is directly tied to the birth rate.
