We have been trading Foot Locker (NYSE:FL) for nearly two years, buying in the $40s and selling around $50s, and in the present column, we are revisiting the play as the stock is back teetering around and under the $40 level. The stock had begun to rally ahead of earnings but is now being hit hard by the most recent earnings report, which, from a standalone quarter perspective, you really couldn't ask for much better. Considering where retail has been, and where this company has been, we are a bit flabbergasted by the selloff. The company was effectively in line on the top line and surpassed bottom line estimates. There were some strong positives in the quarter that are being completely ignored by the Street, and we believe that the market will recognize these positives in the coming weeks and revalue the stock higher as we move into the holiday shopping season. It is our opinion shares are a buy again for another run higher, and we expect a dividend hike as well come April 2020.
The play
Before delving into the specifics, let us lead with our play. This clear directive below is how we share all of our trades at BAD BEAT Investing. The Street has punished the stock, and it seems like a classic setup that we look for. Here, we are at $37.85 at the time of this writing. We think, in this zone, shares are a buy. From a valuation perspective which is discussed later, at this level, the stock is compelling. This is likely a make or break holiday season for the company with the economy still strong. We like owning shares yielding nearly 4% as we enter this season. The company has worked to turn the ship around and adapt in an ever-changing retail landscape. Here is how we are currently playing the stock:
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