No Crying Jordans At Jefferies: Nike Still A Long-Term Winner

Nike Inc NKE reported its 4Q EPS marginally ahead of expectations. While the company does face some near-term headwinds, the stock deserves to trade at “a more premium multiple” in the long term, Jefferies’ Edward Plank said in a report. He reiterated a Buy rating for Nike, while reducing the price target from $67 to $65.

Nike reported its 4Q EPS at 49c, a penny ahead of expectations. GM contracted 30bps due to inventory clearance in North America. Analyst Edward Plank stated, however, that inventory in full price channels was clean and the remaining overhang would likely be cleared in 1Q.

NT Headwinds Shall Pass

Management indicated some changing style preferences and pointed towards a focus on sportswear lifestyle product innovation, noting good early successes. “Add’ly running remains strong and basketball sell-throughs are improving on the strength of the new KD and Kyrie shoes and ongoing health of Jordan, giving us more confidence in the category,” Plank wrote.

ASP growth of 7 percent was reported for 4Q and management sees continued growth ahead, which would result in gross margin expansion.

LT Winning Stock

“While some moving P&L parts and market share oscillation is likely to pressure the stock and results through 1H17, we remain upbeat on the LT view, given the likelihood for improvement in N.A. over the year, coupled with healthy int’l bizs (esp. China, up 23% in 4Q), rapid DTC growth, and the benefits of manufacturing efficiencies now beginning to be realized,” the analyst mentioned.