Nike's Momentum Confirmed In Earnings Report: Are Analysts Remaining Bullish?

Zinger Key Points
  • Nike beat third-quarter consensus earnings on Tuesday by a wide margin, despite some weakness in international sales.
  • Analysts at Raymond James, RBC Capital Markets, Morgan Stanley, Oppenheimer, and Third Bridge weigh in.

Nike Inc NKE beat consensus estimates in the third-quarter, paying 79 cents per share on revenues of $12.4 billion. Nike Direct sales rose 17% year-over-year, while digital sales increased by 20% and wholesale grew 12%.

Despite some weakness in China, where Nike Brand revenues fell 8% year-over-year, analysts see a recovery in the near term, with many giving Outperform ratings on the stock.

The Raymond James Analyst: Rick Patel reiterated an Outperform rating on Nike, and raised the price target from $130 to $135.

Patel said he expects the company's revenue to benefit from ongoing strength in Nike Direct, global brand momentum, higher average selling prices, innovation, and FX in 2024. Raymond James sees a material GM expansion as Nike makes progress on recapturing “trapped margins” from transitory issues.

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The Morgan Stanley Analyst: Alex Straton maintained an Overweight rating, and raised his price target from $138 to $140.

Straton said that while the report wasn't a game-changer, it did confirm ongoing revenue momentum, continued progress on working down excess inventory levels, and sequentially improving China trends. Morgan Stanley sees Nike’s 2024 guidance as the next major catalyst for the stock, which will give a better sense of whether Nike's DTC transformation will yield the margin expansion promised by the company.

The RBC Capital Markets Analyst: Piral Dadhania reiterated his Outperform rating, and left its price target unchanged.

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Dadhania said RBC sees the report as confirmation of Nike's momentum and execution strength. The company's broad-based revenue growth was positive, although earnings were impacted by gross margins or supported by lower-than-expected demand creation expense in the quarter.

The Oppenheimer Analyst: Brian Nagel issued an Outperform rating on the stock and did not give a price target.

Nagel welcomed Nike’s report, saying its guidance is solid and well above plan trends at the company. Oppenheimer sees sales growth across the Nike enterprise as strong, reflecting both unit demand and successful pricing actions on the part of management.

Third Bridge's Shoggi Ezeizat said that the sports footwear industry remains strong heading into the first half of 2023 despite squeezed consumer spending.

Nike has done well to reduce its elevated inventory levels, and its margin outlook is positive due to the easing of freight costs, a better inventory position, and its prioritization of direct-to-consumer.

Ezeizat sees Nike's sales in China as boosted by pent-up demand after the end of Covid restrictions, but is more cautious about the long-term growth prospects of Nike and Western brands in China due to intensified competition with local Chinese brands.

Price action: Shares of Nike closed 4.86% lower at $119.50 on Wednesday, according to data from Benzinga Pro.

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