Nike Set For North American Sales Growth, Says Wedbush Analyst

Nike Inc NKE has found itself in a position it's unaccustomed to in North America: the comeback kid.

The Analyst

Christopher Svezia of Wedbush upgraded Nike from Neutral to Outperform and raised the price target from $57 to $74.

The Thesis

Nike has reached an inflection point in margins and is expected to grow sales in North America in fiscal 2019 according to a new analyst note from Wedbush.

North America, once Nike’s playground, became an embattled territory for the company as it faced fierce competition in the region. 

Nike’s Vapormax technology was considered the catalyst to take on adidas AG (ADR) ADDYY's Boost technology, but its performance style was off-trend in the current environment.

Price Action

The company has now changed their pipeline to embrace more retro and casual silhouettes, Svezia said. (See the analyst's track record here.) 

“Our conversations with retailers also indicate that NKE has one of the biggest opportunities in 2018 to show improvement,” the analyst said. 

Nike is facing easier comparisons in arguably its most important category, basketball, which has struggled industrywide over the past two years. International sales also continue to perform, while product initiatives combined with FX tailwinds could lead to notable gross margin gains in fiscal 2019, Svezia said. 

“In short, the negatives are subsiding and the positives are accelerating, leading us to believe high single-digit sales, gross margin gains and mid-teens EPS growth is increasingly more likely in FY19." 

Shares of Nike hit their highest levels in over two years following the upgrade, up 4 percent, at last check trading at $66.81. 

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Photo courtesy of Nike.