Companies and Brands

Why Analysts Are Chasing Nike Even Higher

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After Nike Inc. (NYSE: NKE) reported fiscal third-quarter results late Thursday, analysts cheered on this report, hiking their price targets. At the moment, Nike appears to be one of the few bright spots in the Dow Jones industrial average.

24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying about Nike following the report.

The athletic gear maker reported a diluted net loss per share of $0.57 on revenue of $9 billion. In the same period a year ago, the company reported adjusted earnings per share (EPS) of $0.68 on revenue of $8.43 billion. Third-quarter results also compare to consensus estimates for EPS of $0.53 and $8.85 billion in revenue.

Excluding a charge of $1.25 per share related to effects of changes to U.S. tax laws, Nike would have posted earnings of $0.68 per share.

The company did not offer any guidance, but consensus estimates call for fourth-quarter EPS of $0.73 and revenues of $9.32 billion. For the full year, Nike is expected to post per-share earnings of $2.30 and revenues of $35.87.

Wedbush reiterated an Outperform rating and raised its price target to $75 from $74, with the firm noting that key initiatives designed to reignite Nike’s growth in North America and around the globe are gaining traction and were evident in its third-quarter results that beat across all lines.

Merrill Lynch reiterated an Underperform rating but raised price objective to $50 from $42, and it raised its 2018 earnings estimate on lower tax rate guidance. The firm still noted that initial 2019 guidance is below a five-year growth algorithm and still sees pressure in North America while direct to consumer efforts were not growing as fast as hoped.

Credit Suisse reiterated an Outperform rating with a $78 price target. The firm detailed in its report:

Nike is finally poised to reverse 2 years of share losses: 1) New innovation scaling (VaporMax selling “millions” of pairs, Epic React selling out); 2) N. America momentum accelerating exiting third quarter (fourth quarter revenue guidance: flat vs third quarter: -6%); 3) accelerating int’l momentum (revenues +19% in third quarter). We’re lowering fiscal 2019 EPS slightly to reflect our view that Nike plans to accelerate investments, as well as N. America revenues (despite improving) still below Nike’s +MSD algorithm (which should result in EPS below midteens algorithm). But with the key sentiment driver (N. America) starting to accelerate (US wholesale back to “pull-market”), & upside to +50 basis points gross margin guidance.

A few other analysts weighed in on the stock after the report:

  • B. Riley is Neutral but raised its price target to $68 from $63.
  • Canaccord Genuity has a Hold rating and raised its target to $62 from $60.
  • Deutsche Bank raised its price target from $75 to $76.
  • Instinet has a Buy rating and raised its target to $74 from $65.
  • Jefferies raised its price objective to $68 from $59.
  • Raymond James raised its target price to $75 from $67.
  • Susquehanna has a Neutral rating and raised its target from $60 to $62.

Shares of Nike were last seen up about 3% at $66.49 on Friday, with a consensus analyst price target of $68.68 and a 52-week range of $50.35 to $70.25.

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