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Nike Target Lifted; Bank of America Confident of Outlook

'Supply chain headwinds are appropriately reflected in management's reduced fiscal 2022 guidance,' Bank of America says.

Bank of America raised its price target for athletic shoe/apparel juggernaut Nike Thursday to $170 from $160, keeping its neutral rating.

Adidas’s ADDYY mixed third-quarter earnings report Wednesday “provided incremental visibility on two key debate topics for Nike: the global sportswear supply chain and the recovery in China,” Bank of America analyst Lorraine Hutchinson wrote in a commentary.

“Not much has changed since NKE's fiscal Q1 earnings call in September that alters our view that supply chain headwinds are appropriately reflected in management's reduced fiscal 2022 guidance.”

The price target increase -- to 38 times B of A’s estimated fiscal 2023 earnings versus 35 times previously -- reflects “peer multiple expansion and our confidence in the fiscal 2022 outlook,” Hutchinson said.

“In our view, strong demand trends (ex-China) and the Vietnam recovery are offset by continued uncertainty in the sales and margin recovery in China.” Hence the continued neutral rating.

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Nike recently traded at $167.53, down 0.4%, .

Morningstar analyst David Swartz likes the company, though he thinks the stock is overvalued. He puts fair value at $128.

“We view Nike as the leader of the athletic apparel market and believe it will overcome the challenge of Covid-19, despite near-term supply issues,” he wrote last month.

“Our wide-moat rating on the company is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. 

"Nike, the largest athletic footwear brand in all major categories and in all major markets, dominates categories like running and basketball with popular shoe styles.”