Academy Sports (ASO) vs. DKS and WMT: Can a Post-Pandemic Sales Recovery Unlock Major Upside?

Is ASO a good stock to buy? We came across a bullish thesis on Academy Sports and Outdoors, Inc. on r/Valueinvesting by u/Embarrassed_Mix7664. Since the thesis was published on August 28th, ASO shares have gained 36.39%, supported by stronger earnings and a higher full-year profit outlook. In this article, we will summarize the bulls’ thesis on ASO. Academy Sports and Outdoors, Inc.’s share was trading at $59.33 as of October 27th 2026. ASO’s trailing and forward P/E were 10.00 and 8.46 respectively according to Yahoo Finance. This isn’t the first time we see a sporting goods retailer pitched as a great investment. ASO shares gained 21.48% over the last 12 months. Other retail stocks like Target and Walmart gained 57.26% and 16.46%, respectively, during the same period. Why are retail stocks rising, and does ASO still offer a compelling buying opportunity after its gains? Pixabay/Public Domain In September, we published an article about Academy Sports (ASO) Rockets 14% on Solid Q2 Despite Consumer Spending Tests, highlighting an earnings report that sent shares sharply higher. But stronger results haven’t erased Wall Street’s caution. This article explains why analysts raised their price targets on ASO while keeping their ratings unchanged. Before getting into our analysis, let’s take a look at the business and why some investors like the stock so much. Academy Sports and Outdoors, Inc. (NASDAQ:ASO) is a value-focused sporting goods and outdoor retailer with a strong footprint across Texas and the Southeast. About a third of its sales come from outdoor, hunting and fishing gear, and roughly a fifth to a quarter of its products are private-label, giving it more control over pricing and margins. The bullish argument is that investors may be mistaking a return to normal after the pandemic boom for a permanent decline in the business. That view got support in the first quarter, when comparable sales grew 2.9%, with both shopper traffic and average spending moving higher. The stock trades around $42, down about 31% from its February high of $62.45, and works out to only about 6.5 times the midpoint of management’s full-year earnings guidance of $6.35 to $6.85 per share. That low multiple suggests the market is treating Academy Sports and Outdoors, Inc. like a retailer in structural trouble, even though its post-pandemic reset may already be behind it. The case for that view rests on the idea that the company’s three years of falling comparable sales were less about losing customers and more the natural comedown from an unusually high pandemic-era base. Revenue climbed from about $4.8 billion in fiscal 2019 to roughly $6.8 billion at the pandemic peak, before settling near $6.1 billion in fiscal 2025. Through that whole period, gross margin held steady around 34%, actually higher than the 29%-30% range it ran at before COVID. The first-quarter comparable sales growth of 2.9% looked encouraging next to peers: Dick’s Sporting Goods, Inc. grew 4.9%, Target Corporation posted 3.8%, and Walmart Inc. came in at 2.6%. Wall Street, by contrast, reportedly expects Academy Sports and Outdoors, Inc. to grow only around 1% this quarter, a much lower bar than its larger competitors already cleared. A few things could make the September 9 earnings report a meaningful test of that thesis. Dick’s Sporting Goods, Inc. called out strong World Cup-related sales during the same quarter its core stores comped 4.9%, and Academy Sports and Outdoors, Inc. may see similar demand while facing less of the mall traffic and sneaker-launch weakness that hurt Foot Locker, since footwear makes up only about a fifth of its sales and Nike accounts for roughly a tenth. Outdoor gear and private-label products, which the company controls more tightly, make up a larger share of the mix instead. It could also collect $25 million to $55 million in tariff refunds, adding roughly $0.35 to $0.65 per share to earnings, while plans to open 20 to 25 new stores this fiscal year, including 11 in the third quarter, give it another growth lever. The company has already bought back about a quarter of its shares since going public in 2020, and continuing to repurchase stock at today’s cheap valuation could boost per-share value further. None of this requires the stock to be viewed as a premium retailer for the thesis to work. If earnings power reaches around $7 per share and the market eventually assigns a more typical 9 to 10 times multiple instead of today’s 6.5 times, the shares could re-rate significantly higher. September 9 is meant to be one data point in a longer process rather than a single make-or-break trade, with a solid second-quarter print potentially followed by further confirmation when third-quarter results arrive in December. If comparable sales keep growing into 2027, investors may start seeing the last three years as a completed reset rather than an ongoing decline. That said, the upcoming report is also a real test of whether the bullish story holds up. The stock kept falling even after a strong first-quarter beat in June, because management said comparable sales were running roughly flat quarter-to-date through Memorial Day, raising worries the recovery was already losing steam. Flat comparable sales combined with shrinking gross margin and cautious guidance on September 9 would support the bearish view. A weaker consumer, higher interest rates, heavier discounting across sporting goods, or branded-footwear troubles spilling into its value-priced categories could all weigh on results. The World Cup boost, tariff refunds, new stores, and buybacks all need to support genuine demand rather than mask a weakening business. Gross margin matters most here: its stability well above pre-pandemic levels has been the clearest sign the company’s competitive position hasn’t slipped. If that margin starts eroding just as sales soften, the stock’s low valuation would start to look justified rather than cheap. Another risk for the stock is that new stores fail to generate attractive returns on the money invested. Expansion gives Academy another growth opportunity, but entering less familiar markets requires spending before customer demand is established. The company warns that new locations may not achieve profitability comparable to existing stores. If sales build more slowly than expected, rent, staffing, and inventory costs could weigh on earnings. Stores opened near existing locations could also shift sales between branches rather than create genuinely new demand. This could absorb cash that would otherwise support buybacks or dividends. In our opinion, the stock’s discount could persist if expansion increases total sales without delivering stronger profits and returns on invested capital. Hedge fund positioning shows a mixed signal (see why Heartland Value Fund added to ASO after the sector sell-off). As per our database, 29 hedge fund portfolios held Academy Sports and Outdoors, Inc. at the end of the second quarter, down from 31 in the previous quarter. This modest pullback suggests institutional investors stayed cautious even as the stock’s low valuation, improving sales trend, and potential re-rating made it look attractive on paper. By comparison, Dick’s Sporting Goods, Inc. (NYSE:DKS) was held by 52 hedge funds, up from 48, Walmart Inc. (NYSE:WMT) was held by 111 hedge funds, up from 99, and Target Corporation (NYSE:TGT) was held by 63 hedge funds, down from 68. The pattern points to institutions growing more confident in Walmart Inc. and Dick’s Sporting Goods, Inc. during the quarter, while conviction in Academy Sports and Outdoors, Inc. eased slightly despite its cheaper price and improving fundamentals. Short interest data also paints a fairly concerning picture for Academy Sports and Outdoors, Inc. relative to its peers. About 21.71% of Academy Sports and Outdoors, Inc.’s float is sold short, higher than DICK’S Sporting Goods, Inc. at 19.35% and well above Target Corporation at 3.80% and Walmart Inc. at 1.83%. This suggests Academy Sports and Outdoors, Inc. is drawing the most skepticism among the four retailers, reflecting doubts about whether its recovery can last, though stronger results could prompt short sellers to buy back shares and help push the price higher. Valuation Analysis ASO’s forward P/E is 8.46x. Walmart Inc., Target Corporation, and DICK’S Sporting Goods, Inc. trade at forward P/Es of 36.50x, 16.06x, and 10.32x, respectively. ASO’s own forward P/E was 8.92x on January 31, 2026, making its current valuation approximately 5% lower. We believe the current valuation reflects investor concerns about discretionary spending, the durability of Academy’s sales recovery, and potential margin pressure. However, the discount appears meaningful given the company’s continued profitability and improving customer traffic, although the gap with direct competitor DICK’S is more modest. Academy’s first-quarter comparable sales increased 2.9%, supported by both traffic and average spending, while gross margin remained around 34%, above its pre-pandemic range of 29%–30%. We believe ASO can justify its current valuation without returning to pandemic-era growth if steady sales and resilient margins sustain profits without relying on tariff refunds or a shrinking share count. If Academy maintains its sales recovery and turns new-store openings into sustained earnings growth, the current valuation could offer an attractive entry point despite the risks surrounding consumer demand and retail competition. Previously, we covered a bullish thesis on Academy Sports and Outdoors, Inc. (ASO) by Kristopher Rymer in January 2025, which highlighted its discounted valuation, geographic expansion, resilient margins, and accretive buybacks. ASO’s stock price has appreciated by approximately 6.78% since our coverage. We believe ASO offers an attractive entry point if sales recovery continues, margins hold, and new stores generate profitable growth, though consumer demand and execution risks remain. Academy Sports and Outdoors, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. While ASO could offer long-term upside if its sales recovery continues and new stores generate attractive returns, we believe certain AI infrastructure stocks offer far stronger long-term potential at a much more attractive entry point. If you are looking for an AI stock more promising than ACN that operates as a critical AI tollbooth and stands as the most important company in the world, check out our report about this must-own AI stock. Disclosure: None.