Kimberly Greenberger of Morgan Stanley raised her target to $165 from $152, keeping her overweight rating. Cowen analyst John Kernan lifted his target to $165 from $150, and also maintained an outperform rating.
Nike shares recently traded at $138.96, up 0.15%, and have climbed 38% year to date. The subdued reaction to the analysts could reflect Nike’s forward price-earnings ratio of 54.05, compared to a five-year average of 29.37, as measured by Morningstar.
“Covid-19 has allowed NKE to further accelerate its direct-to-consumer strategy, making it one of the key apparel & footwear companies whose business model, total addressable market and margin profile look better positioned post-Covid-19,” Greenberger wrote in a report.
“While we expect ongoing, short-term Covid-19 headwinds in the remainder of NKE’s fiscal 2021 (ending May 21) until a vaccine is widely available, we emphasize NKE’s commitment to and initial execution of its Consumer Direct Acceleration strategy further solidify our belief in its long-term revenue and margin expansion story.”
As for Cowen’s Kernan, he said consensus earnings forecasts are conservative. Nike's premium valuation makes sense given the trend toward digital sales, he said. That could mean a move to $6 of earnings per share and to the mid-teens in percentage terms for compounded annual growth in EPS, he said.
Nike’s next earnings announcement is scheduled for Dec. 18. Last quarter, the company said revenue declined 1% from a year earlier to $10.6 billion. Digital sales jumped 82%.