Finish Line Inc (NASDAQ:FINL) has received yet another analyst upgrade as the conversation surrounding footwear retailers continues to improve.

The Analyst 

Susquehanna’s Sam Poser upgraded Finish Line from Neutral to Positive with a $14 price target.

The Thesis

Although Nike Inc (NYSE:NKE)'s plan to return to a scarcity model will mean less marquee items for Finish Line, Poser said he's confident the quality of current products will result in faster liquidations at higher margins, allowing the company to quickly move to the next key item.

Guidance initially called for same store sales to be down 3 to 5 percent in the fourth quarter of 2018, but channel checks indicate that sales and promotional trends were not as bad as initially anticipated, the analyst said. Susquehanna is now forecasting a Q4 same-store sales of decline of 1.2 percent. 

“Our checks indicate that the mix of product available to FINL is better than it was a year ago, even if pairs are limited,” Poser said.

The analyst raised EPS estimates from 57 cents to 65 cents after reducing the company’s expected tax rate from 37.5 percent to 31.5 percent to reflect the newly lowered U.S. corporate rate. 

Strength in running and casual athletic categories are nearly offsetting any negatives seen in basketball and the fashion/urban athletic categories, Poser said. 

Nike's release of its Epic React running shoe Feb. 22 and Under Armour Inc (NYSE:UAA)'s launch of its HOVR platform Feb. 1 are two major additions to the casual athletic category and are expected to be additive to February’s same-store sales numbers, the analyst said. 

Sports Direct Acquisition Still In Play 

Rumors of Sports Direct taking over Finish Line have waned in the past few months, but Poser said a takeover will eventually happen,

“We continue to contend SPD will eventually acquire FINL and believe conversations between SPD and FINL are ongoing,” the analyst said. 

“Based on conversations with our derivatives strategy team, we believe the SPD timetable has been shifted out until May 2018, but the likelihood of the acquisition remains." 

Price Action

Finish Line shares were up 6.49 percent at the time of publication Monday.

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