Analysts Raise Nike (NKE) Price Targets ahead of Earnings

Jacques Potts and Alex Moreno

As we reported earlier this week, Nike is expecting to release its FY1Q20 earnings report next week. Nike has been one of the few companies that was not largely impacted by the COVID-19, meaning that its growth slowed down but it wasn’t slammed down. Nike is positioned to have success post-pandemic because of the adaptive and efficient nature of its business model. Ahead of Nike releasing its quarterly reports, several analysts reiterated their rating on the shares and raised price targets.

Analysts at Morgan Stanley reaffirmed their Overweight rating on Nike while raising their PT to $142 (from $121). The analysts stated “NKE is one of the few companies in our coverage whose business model, TAM, and margin profile look better-positioned post-COVID-19”. They also highlighted a few factors that could potentially influence the long-run success of NKE including a commitment to Consumer Direct Acceleration, robust athletic footwear growth in the upcoming year and Nike realigning its operations models.

Analysts at Needham raised their price target on NKE to $132 (from $113). They maintained a Buy rating and mentioned that demand in F1Q21 was better than they initially expected. Analysts at Needham focused on Nike’s athleisure category that is suitable both for exercise and everyday wear. More factors that they took into consideration while rating Nike was the continued strength of DTC, and an upcoming rebound in China. In addition, Nike’s strength was represented clearly when despite store reopenings, digital commerce remained strong.

Some commentary analysts at Needham made to back their positioning was, “With strong momentum in the category, we expect companies to chase Nike inventory in the coming months, which should drive a positive inflection for N. America in F2H, if not earlier, in our view...We consider the company's strategy to emphasize direct-to-consumer is a significant and sustainable driver of sales and profitability globally.”

Barclays is also optimistic on the company’s outlook, raising their price target on Tuesday morning to $132 (from $118) while reiterating an Overweight rating on the shares and commenting that “ NKE remains our Top Pick, as the company 1) continues to accelerate its business transformation shifting to margin-accretive direct sales, leading with digital penetration, 2) builds its physical footprint of small, highly productive and profitable mono-brand stores, and 3) leverages wholesale partnerships with limited capital investment for its 'Marketplace of the Future'."

Nike has a reputation for providing customers with high-quality goods and services at an affordable price. Will this be enough for Nike to pull away from its competitors and give it the boost to continue to hike up? Let us know your thoughts in the comments below!

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Disclosure: At the time of publication, we have no positions in any of the securities mentioned in this article. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.

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