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Tuesday, March 30, 2021

Why China Shouldn't Worry Nike Bulls - Barron's

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Nike won’t suffer long-term fallout from the China matter, says Oppenheimer analyst Brian Nagel.

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Nike stock fell again on Tuesday, pressured by investors’ nervousness about diplomatic tensions over China’s alleged human rights abuses. But Oppenheimer has joined the chorus: Buy the dip.

Shares of Nike (NKE) were down 0.9% to $132.18 in midday trading Tuesday.

Analyst Brian Nagel reiterated an Outperform rating and $150 price target, calling the stock one of his top picks. While the conflict has weighed on the shares, he thinks the company will weather the storm without any major damage.

Still, there are near-term concerns about the current situation. Boycotts and negative online sentiment can hurt Nike, which gets about 20% of total revenues from China. Also, prominent Chinese influencers and brand ambassadors have ended their contracts, hurting the brand. And there have been reports that some online platforms are blocking Nike’s e-commerce business in China. Finally, with nearly a quarter of the company’s products sourced from the nation, the dispute could cause supply chain issues.

Nonetheless, Nagel thinks there won’t be long-term fallout from the China matter; other analysts have also argued that the China-related selloff is a buying opportunity.

Nagel was reassured after speaking with Nike management. “In our view, while the situation in China for Nike remains fluid and at least somewhat opaque, we expect dynamics to resolve over time given Nike’s history of managing well geopolitical issues elsewhere, including in the US, and the long-standing power of the company’s brand and consumer connections.”

While the situation may remain in the headlines, he argues that Nike is still one of the best-positioned, economic-recovery plays in his coverage, which explains his ongoing bullishness.

Write to Teresa Rivas at teresa.rivas@barrons.com

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March 30, 2021 at 11:08PM
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Why China Shouldn't Worry Nike Bulls - Barron's

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