Women’s gear remains a big opportunity for Nike, according to Cowen & Co.’s John Kernan.
Stephanie Keith/Getty ImagesNike shares have jumped 37% in 2020, and are hovering near all-time highs. Yet Cowen & Co sees the rally continuing, and believes he market is underestimating the athletic-gear giant’s earnings power.
Analyst John Kernan reiterated an Outperform rating on Nike (ticker: NKE) Tuesday, while raising his target for the stock price to $165 from $150, making him one of the most optimistic of the analysts tracked by FactSet. He wrote that consensus expectations are too low for both earnings per share and revenue in fiscal 2022—Nike’s year ends in May—and that the company’s ability to surprise on the upside will bring more gains.
Kernan’s data, which tracks top-selling items on Nike’s own website, as well as at third parties such as Foot Locker (FL), show that consumers are buying a more diverse range of the company’s products. He believes women’s gear “remains a huge opportunity,” and that average selling prices can continue to rise on the company’s hottest items, like its VaproMax, Air Max, and Flyknit shoes.
He noted that Google Trends data show that more shoppers are searching for Nike in recent months, while the company also appeared not to run may promotions over the Black Friday-Cyber Monday long weekend. That is another indication that Nike is resonating with consumers, who are willing to pay up for its products.
Ultimately, Kernan thinks Nike will be able to reach $6 of earnings a share—up from the just over $3 he expects this year—helped by “Nike’s global position in sport and fashion and growing scale digitally.” And while the shares trade at a premium, it is justified given the transformation the business is undergoing, he said.
Nike stock was up 0.2% to $139 in early trading. Other analysts have also touted the stock’s potential. The company raised its dividend last month.
Write to Teresa Rivas at teresa.rivas@barrons.com
December 08, 2020 at 09:59PM
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Nike Stock Is Near All-Time Highs. This Is How It Could Go Higher. - Barron's
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