Is Academy Sports (ASO) a Buy Ahead of Q2 Earnings? Decoding Analyst Revisions and Divisional Sales Trends

Academy Sports and Outdoors (ASO) has long been a polarizing name in the retail sector, with its stock underperforming the broader market by -0.2% year-to-date versus the S&P 500’s +1.3% [4]. Yet, for contrarian value investors, the company’s mixed performance and recent analyst revisions present a compelling case. With Q2 earnings due on September 2, 2025, the question is whether ASO’s discounted valuation and divisional resilience justify a buy thesis.

Analyst Revisions: A Mixed but Encouraging Signal

Analysts have revised ASO’s Q2 2025 earnings forecast to $2.14 per share, a 4.4% increase from the prior-year period [1]. While this reflects optimism, the revisions themselves are uneven. Telsey Advisory Group’s Cristina Fernandez maintained an Outperform rating with a $65 price target, while Evercore ISI Group’s Greg Melich raised his target from $50 to $55, signaling confidence in ASO’s long-term potential [1]. Conversely, some firms like Wells Fargo and Morgan Stanley trimmed their targets, citing macroeconomic headwinds [1]. This divergence underscores a key contrarian opportunity: the market may be overcorrecting for risks that are already priced in.

ASO’s PEG ratio of 0.64–0.72 (depending on the source) [5] further supports undervaluation. A PEG below 1 suggests the stock is trading at a discount relative to its expected earnings growth. At a P/E of 9.81 [5], ASO trades at a steep discount to the S&P 500’s average P/E of 19.5, making it a candidate for investors seeking high-conviction, low-multiple plays.

Divisional Trends: Contrarian Focus on the “Weak” Segments

ASO’s Q2 guidance reveals a stark contrast between its divisions. The Outdoors segment is projected to grow 10.2% year-over-year to $431.73 million, while Sports and Recreation sales are expected to decline 4.8% to $382.84 million [4]. Apparel sales are also forecast to fall 1.6% to $429.69 million [4]. These figures highlight a critical contrarian angle: the market may be undervaluing ASO’s ability to pivot toward high-growth segments like Outdoors, which benefits from the “active lifestyle” trend.

Meanwhile, the Footwear division’s 3.1% growth to $321.82 million [4] suggests ASO’s product mix is adapting to consumer preferences. This resilience is particularly notable given the company’s Q1 struggles, where earnings missed estimates and net sales declined 0.9% [6]. Yet, the stock’s 4.8% pre-market rally after Q1 results [1] indicates investor confidence in management’s ability to navigate challenges.

Balance Sheet and Risk Mitigation

ASO’s balance sheet shows a 5.7% increase in total assets to $5.18 billion in Q1 2025, while liabilities fell 11.6% to $3.23 billion [3]. However, cash and equivalents dropped 24.6% to $285.1 million [3], raising questions about liquidity. The company’s debt-to-equity ratio of 0.94 [5] is moderate, but the 15% rise in merchandise inventories to $1.56 billion [3] could pressure margins if demand softens.

That said, ASO’s proactive measures—such as diversifying supply chains to mitigate tariffs [6]—demonstrate operational discipline. These steps, combined with store expansion (five new locations in Q1 2025 [6]), suggest a long-term strategy to stabilize cash flow and reduce reliance on volatile segments.

The Contrarian Case: Buy or Wait?

For value investors, ASO’s discounted valuation and divisional rebalancing offer a compelling risk/reward profile. While the Sports and Apparel segments drag on short-term results, the Outdoors division’s growth and the company’s low PEG ratio indicate potential for re-rating. Analysts’ mixed price targets also suggest a floor for downside risk, with Telsey’s $65 target implying a 40% upside from current levels.

However, caution is warranted. The company’s Q1 earnings miss and cash flow challenges highlight execution risks. Investors should monitor Q2 results for signs of inventory optimization and whether the Outdoors segment’s growth is sustainable.

Conclusion

Academy Sports is not a “buy” for the faint of heart. Its mixed performance and macroeconomic sensitivities demand a contrarian mindset. Yet, for those willing to look beyond near-term volatility, ASO’s undervalued metrics, divisional pivots, and analyst optimism create a compelling case. As the September 2 earnings date approaches, the key question is whether the market will recognize the company’s long-term potential—or continue to punish it for short-term stumbles.

Source:
[1] Academy Sports and Outdoors Likely To Report Higher Q2 Earnings These Most-Accurate Analysts Revise Forecasts Ahead Of Earnings Call [https://www.benzinga.com/analyst-stock-ratings/price-target/25/08/47410559/academy-sports-and-outdoors-likely-to-report-higher-q2-earnings-these-most-accurate-analysts-revise-forecasts-ahead-of-earnings-call]
[2] Academy Sports and Outdoors Q2 Earnings Expectations [https://www.ainvest.com/news/academy-sports-outdoors-q2-earnings-expectations-analyst-ratings-2508/]
[3] Academy Sports + Outdoors Reports First Quarter Fiscal 2025 [https://investors.academy.com/news-releases/news-release-details/academy-sports-outdoors-reports-first-quarter-fiscal-2025]
[4] Academy Sports and Outdoors (ASO) Projected to Post ... [https://www.marketbeat.com/instant-alerts/academy-sports-and-outdoors-aso-projected-to-post-quarterly-earnings-on-tuesday-2025-08-26/]
[5] Academy Sports and Outdoors (ASO) Statistics & Valuation [https://stockanalysis.com/stocks/aso/statistics/]