Nike stock has cooled down since January, but several Wall Street analysts see a rally ahead.
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Nike is scheduled to report earnings after the bell Thursday, and analysts are bullish about the athletic giant’s quarter.
Nike (NKE) was a major winner in 2020, and several analysts have expressed optimism about the results amid that momentum. Yet their confidence comes at a time when the shares’ climb has slowed, rising just 1.4% since January, after a 115% run in the past 12 months.
However, another strong quarter in the vein of December’s blowout might be what the shares need to start rallying again, noted Barclays’ Adrienne Yih, one of the analysts who championed the shares Monday. “If anyone can navigate the volatile backdrop, it’s Nike,” she wrote, expecting that the company “will shine as it reports upside” and could deliver a better-than-expected outlook for its recovering North American business.
Yih calls Nike’s lackluster 2021 showing “a rare opportunity to build positions,” especially as the report “could be the sentiment-changing data point that reverses its underperformance year to date.” She reiterated an Overweight rating and a $174 price target on the shares.
Likewise, Piper Sandler’s Erinn Murphy also kept an Outperform rating and boosted her price target by $2, to $170. She believes the stock’s recent performance overlooks the fact that Nike fits “a theme that is permanent post-pandemic—the accelerating casualization of the wardrobe.”
Murphy expects that China, which is just lapping the one-year anniversary of Covid-19, will be the star of the report, with sales jumping 30% on a constant currency basis.
RBC Capital Markets’ Kate Fitzsimons reiterated her Outperform rating and $160 price target. She notes that at 36 times forward earnings, “Nike shares do not look cheap but rightly so given the brand’s dominant position in the attractive athletic category with an accretive competitive moat.”
Fitzsimons thinks that the quarterly report could lead to upward earnings revisions on the Street, and agrees that Nike’s rally doesn’t have to end when the threat of Covid fades. “[T]he secular tailwinds behind athletic [products] will continue as consumers prioritize health, wellness, digital, and certainly innovation.”
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