JPMorgan reaffirmed its Overweight rating on Nike Inc (NYSE: NKE) and set a December 2017 price target of $67 after the company reported fourth-quarter EPS of $0.49, a penny above the Street's $0.48 estimate, on 6 percent top-line growth.
"While Nike sets up near-term as a 2H17"show-me"story, four turns of multiple compression post the 3Q print creates an attractive multi-year entry point in our view with a low-to-mid-teens base case bottom-line profile equating to $3.00 in CY18 EPS power," analyst Matthew Boss wrote in a note.
Looking ahead, Nike still expects high single-digit top-line growth, implied double-digit EPS growth and gross margin up 30–50bps for the year. For the first quarter, Nike guided revenues up mid-single digits on a reported basis and gross margin down 100bps.
"Nike's brand is best-in-class with significant runway remaining in the long-term story (with both top-line and gross margin) — a compelling combination, in our view. Given strong brand equity and continued product innovation, we are modeling compound annual revenue growth of ~10 percent through 2018 (~$50 billion 2020 goal)," Boss highlighted.
The analyst highlighted Nike's first-mover advantage, with recent technologies such as Dri-Fit and sustainable materials in apparel, and Free, Lunar and Flywire technology in footwear being integrated across all platforms.
"Longer-term, we see management's goal to return to peak GPM (46.3 percent in 2010) as reasonable given improved innovation (product cost reduction), expansion of higher-margin DTC, and pricing power," Boss added.
At time of writing, shares of Nike rose 1.66 percent to $53.97.
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