Here's What Gets Analysts Most Excited About Nike's Release Calendar

“Heightened competition in athletic, a temporary slowdown in Nike Inc NKE's innovation pipeline, and 2Q's negative North America futures leave us to conclude that not all is well in Beaverton,” Deutsche Bank’s Paul Trussell said in a note.

The analyst maintains a Buy rating on the company, while raising the price target from $65 to $66.

Exciting Release Calendar

Trussell expressed a bullish stance, however, on Nike’s release calendar, given the company’s new platforms, the basketball “reset,” as well as expanded lifestyle offerings.

In addition, the analyst noted that international momentum has been continuing.

“New platforms to bring excitement and drive ASPs (average selling prices) higher,” Trussell mentioned, while adding, “With the launch of the Air VaporMax & HyperAdapt, it can accelerate the pace of innovation and drive ASPs higher.”

The analyst also stated that while the Jordan offering continues to be strong, Nike’s other brands have been struggling due to increased competition.

However, “more balanced price points” for the company’s various basketball models, such as KD, LeBron, Kyrie Irving, Paul George and Russell Westbrook, should help Nike compete better.

“Upcoming anniversary celebrations for the Air Max and SB Dunk should help NKE navigate the athletic trend shift away from performance to lifestyle,” Trussell went on to say.

Positive Near-Term Trends

The analyst expressed optimism regarding the near-term trends in two of Nike’s largest regions outside North America, Western Europe and Greater China.

In addition, Trussell believes that the long-term opportunity for margin expansion still exists for Nike in FY18, expecting 120 bps operating margin expansion for the year.

“We expect GPM (gross profit margin) gains from improved North America inventories, higher ASPs associated with a strong release calendar, and DTC & Intl mix shifts. We expect SG&A leverage from stronger sales,” the analyst said.

The EPS estimates for the third and fourth quarter have been lowered to reflect reduced North American revenues in the near term.

The revenue and EPS estimates for FY18 have, however, been raised.

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