Nike's Product Line Is Tipping In A Positive Direction, According To Foot Locker

Retailer Foot Locker Inc (NYSE: FL) believes that good Nike Inc (NYSE: NKE) product will soon outweigh the bad, according to Wells Fargo. 

The Analyst 

Wells Fargo’s Tom Nikic reiterated a Market Perform rating on Nike and raised the price target from $62 to $74.

The Thesis

After a meeting with Foot Locker, Nikic said the footwear retailer’s tone was "very positive" around Nike’s product flows.

Some "rationalization" of the Jordan brand's business continues and is expected to run until the end of the year, Nikic said. Nike’s new premium footwear silhouettes — Vapormax, Air Max 270 and Epic React — are resonating with consumers, according to Foot Locker, and the footwear maker's signature basketball line could be stabilizing, the analyst said. 

A North American Comeback

Nike dominates the bestselling shoes list, and adidas AG (ADR) (OTC: ADDYY) did not even manage to crack the most recent list.

Foot Locker's positive tone gives credibility to Nike’s guidance of improvement to flat North American revenue growth in the fourth quarter of 2018 and growth in fiscal 2019, Nikic said.

Wells Fargo raised its fiscal 2019 EPS estimate for Nike from $2.46 to $2.56.

For the first time in years, Nike has the potential for acceleration in North America over the near-term, Nikic said. 

“Thus, even though the stock appears optically expensive and our raised FY19E EPS is still 11 cents below consensus, we don’t see near-term risk to shares if domestic trends are improving.”

Price Action

Nike shares were down 0.29 percent at the time of publication Monday at $74.68. 

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Baird Expects Nike To Reach North American Inflection With New Products

Photo courtesy of Nike.