Nike Ahead Of Investor Day: Is This The Bottom You've Been Waiting For?

By many measures shares of Nike Inc NKE have been a disappointment for investors throughout 2017, but this could change after the company hosts an investor day presentation Wednesday.

Wednesday's presentation appears to be a direct opposite of the prior investor day back in October 2015, Baird's Jonathan Komp said in a research report. Two years ago, Nike appears to have all the momentum in the world based on a 25-percent earnings per share growth, 20-percent, plus, growth in global futures and a P/E ratio close to 30x, all at a time when its competitors were struggling.

Komp maintains an Outperform rating on Nike's stock with an unchanged $65 price target.

Today, Nike's near-term visibility is "murky." Sentiment is poor based on the stock's current low-20x P/E multiple, the analyst said. But sentiment could start to improve after Wednesday's presentation; management is expected to clarify and/or moderate some of its expectations for future growth.

Nike's management could detail a "credible path" toward:

1. A consolidated revenue growth profile in the mid-to-high single-digits (versus prior expectations for 10 percent growth at the mid-point).
2. A double-digits EPS growth.
3. Healthy gross margin expansion.
4. Total shareholder return in the low- to mid-teens.

The analyst is also expecting management to discuss:

1. The state of the North American marketplace.
2. Direct-to-consumer plans.
3. Timeline on being able to scale "growth accelerators."
4. Potential for new materials and platforms such as Flyleather.

Bottom line, Nike appears to be taking the necessary steps to improve its performance moving forward, despite the mostly negative sentiment surrounding the stock, Komp said. But with a downside potential in Nike's stock to the high $40s and upside to mid $60s, the risk to reward profile is favorable for investors.

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