Deutsche Bank Comments On Nike's 10Q, Says Company Is 'Among The Best'

Deutsche Bank commented on Nike Inc's NKE 10Q filing Friday and maintained a Buy rating and $105 price target.

Analyst Dave Weiner highlighted three key positives:

1. “DTC shift accelerates, helping gross margin: In F2Q, global Nike brand DTC revs. accounted for 21.3 percent of the mix, +221bp y/y. Per Figure 1, this extends the LTM mix to an historic high of 21.6 percent. Within NA, that y/y shift decelerated to +30bp in F2Q, offset by accelerations in W. Europe & China to +240bp & +510bp respectively. Over time, we believe DTC could reach 40 percent+ of revs., which should provide a meaningful GM tailwind (including by +40bp in F2Q).”

2. “China turnaround very much in play, and inventories rationalizing as well: While we already knew that 2Q’s y/y footwear & apparel revs. (local) in China grew by 30 percent & 9 percent respectively, we learned from the 10Q that inventory positioning improved as well...the spread of y/y rev. growth to inventory jumped to +24 percentage points, the best positioning on record.”

3. “ASP growth remains a key differentiator, particularly in footwear: In F2Q, total company ASP grew by 9 percent for footwear and by 1 percent for apparel. Regarding the +1 percent for apparel, we note that NA, W. Europe, and C./E. Europe were +3 percent, +2 percent, and +1 percent respectively. While China dragged at -6 percent due to poor selling of some lower-priced product, we believe that this ASP weakness will be transitional, as mgmt. ramps a premium repositioning strategy in that market.”

Weiner concluded that “we continue to like Nike stock at this level, due to outsized revenue growth and gross margin opportunities which we believe are among the best (if not the best) within our coverage.”

Nike closed at $95.99 Friday, down 1.10 percent.