Shares of The Finish Line Inc. (NASDAQ:FINL) climbed as much as 14% early Monday, then settled to trade up around 6.3% as of 2 p.m. EDT. Susquehanna analyst Sam Poser reiterated his argument that the athletic footwear retailer will be acquired.
More specifically, Poser says that while The Finish Line is still facing a number of fundamental headwinds, there's still a 75% chance that U.K.-based Sports Direct International (LSE:FRAS) will purchase the company to propel itself into the United States market. Poser also reiterated his $12-per-share price target on The Finish Line stock -- a roughly 23% premium to Friday's closing price -- and predicted a buyout could happen at $13.30 per share. Poser also noted that at current prices, the market seems to be assuming a roughly 30% chance that a buyout will occur.
For perspective, Poser's call arrives on the heels of Finish Line's somewhat encouraging fiscal second-quarter results on Friday, which left shares up modestly at the end of last week; the company's earnings arrived at the high end of its latest financial guidance.
To be fair, that guidance was drastically reduced when Finish Line announced preliminary results in late August, causing shares to plunge almost 20% in a single day. At that time Finish Line also adopted a new shareholder-rights plan, or so-called "poison pill," to stave off any potential unfriendly takeovers -- something that Poser speculated was directly related to Sports Direct's 8% stake in the company.
To Poser's credit, now would seem like a perfect opportunity for Sports Direct to make its move. During last week's formal earnings announcement, Finish Line CEO Sam Sato said that his company endured a "very promotional marketplace for athletic footwear" during the quarter, and warned that they're "planning for a challenging retail environment in the near term."
But Sato also stated that Finish Line would focus on managing expenses and inventories as long as these near-term challenges persist, and insisted the company is well positioned to "deliver increased shareholder value over the long term." So it seems Finish Line is content to ride out this storm without selling out to an international suitor.
That's not to say it won't happen, as there's always a chance Sports Direct will make an offer that Finish Line shareholders simply can't refuse. But I think investors should be careful about placing too much weight on a buyout as a central part of their thesis for owning Finish Line stock.