Nike Inc. (NKE - Get Report) shares traded higher Monday after analyst at Bank of America Merrill Lynch lifted their rating on the stock, while boosting their price target, even as it noted the resurgence of rival Adidas AG (ADS - Get Report) as a "significant global competitor."
BAML analyst Robert Ohmes lifted his price target on Nike by 40%, to $98 per share, and improved his rating to 'neutral' from 'underperform', arguing the "accelerated democratization" of the world's biggest sports brand will offset issues such as retail closures, global stagnation in sales of so-called 'performance' shoes while forecasting potential from its "less technical "Sportswear" businesses".
Nike shares were marked 1.17% higher by mid-afternoon trade Monday to change hands at the top of the Dow Jones Industrial Average at $94.98 each, a move that would peg the stock's year-to-date advance to around 28.1%.
Adidas shares, meanwhile, have risen 53% so far this year in euro-denominated terms, and just over 60% on a dollar-adjusted basis, even as growth in the North American market slowed over the three months ending in June.
Revenues in North America increased 5.8%, Adidas said, reflecting a 5% increase at brand 'adidas' and 10% growth for Reebok, but both figures trailed the combined growth rate of 16% recorded over the same period last year and suggest that Nike is starting to win back market share on its home turf.
Nike's group revenues for the three months ending in May rose 4% to an estimate-beating $10.18 billion as Nike-branded sales rose 10% on a currency-neutral basis to $9.7 billion and China sales surged 15.5% to $1.697 billion, the company said earlier this spring.
Nike shares are more vulnerable, however, to the developing backlash against U.S. firms in China following last week's pro-Hong Kong Tweet from an NBA executive that overshadowed the professional basketball league's Asia tour and raised serious questions regarding business ethics and the responsibilities of American companies doing business in the world's second-largest economy.
Nike told investors last month that China growth "continues to set the pace" for the company's global growth, lead by the iconic Air Jordan brand, which helped drive a 27% year-on-year increase in first-quarter sales.
In terms of online sales, the numbers were even more compelling, with digital revenue rising 70% from the year-earlier period, thanks to partnerships with online giant Tencent Holdings (TCEHY) Tmall and WeChat.
"Historically, we've effectively navigated through excessive duties, and we're confident that we'll continue to do so under the current dynamic," Chief Executive Mark Parker told investors on a conference call following the group's first-quarter earnings last month.
"In China, specifically, we continue to extend Nike's lead. In our key cities of Beijing and Shanghai, we serve a generation of digital-first consumers and we support their love of sport by helping to grow participation through grassroots programs."