Nike has benefited from increased demand for exercise gear during the pandemic.
Drew Angerer/Getty ImagesNike will disclose its earnings on Thursday, and Stifel argues that the athletic giant’s results will show that it is still gaining market share, fueling further upside for the recently neglected stock.
Analyst Jim Duffy reiterated a Buy rating and $168 price target on Nike (ticker: NKE) on Friday. His research on footwear sales and demand are “reasons for optimism into year-end despite supply side headwinds,” he wrote.
Nike has done well throughout the pandemic as people buy athleisure and exercise gear, rather than clothes for the office. Still, while the company has been able to overcome some early sales declines related to closings of physical stores, shortages of gear to sell remains an issue for it.
Duffy said that management is performing well, prioritizing its direct-to-consumer channel for sales of high-demand products, which helps to bolster average selling prices. In addition, the high demand indicates that Nike is continuing to increase market share, he wrote.
Although the U.S. is edging closer to normalcy with mass vaccination campaigns, Duffy expects that Nike’s tailwinds from the Covid-19 crisis will continue to bolster results. He estimates that full-year earnings and sales will be 5% and 9% higher, respectively, this fiscal year, which ends in May, than they were pre-pandemic.
This means that the company might increase its full-year financial forecasts when it reports the latest numbers, for the fiscal third quarter. Duffy said that even when life is more normal next year, Nike is likely to see sales gains in the high-single digits, with improving gross margins.
Duffy isn’t the only analyst who is bullish on Nike ahead of the company’s report, yet the shares have dropped nearly 2% since the start of the year.
That comes after a nearly 84% gain in the last 12 months—the stock was the third best performer in the Dow Jones Industrial Average in 2020—a rally bolstered in part by a blockbuster fiscal second-quarter result, in late December.
Some pandemic winners have faced investor skepticism about how they’ll sustain their momentum in a more normalized environment. But at least on Wall Street, confidence about Nike remains high. According to FactSet, 88% of the 32 analysts who cover the stock are bullish.
The stock was down 1.5% to $139.11 in afternoon trading.
Write to Teresa Rivas at teresa.rivas@barrons.com
March 13, 2021 at 01:51AM
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Nike Reports Next Week. There Are 'Reasons for Optimism.' - Barron's
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