The Bullish Signals That Won Nike A Price Target Increase From Wedbush

Nike Inc NKE could be nearing an inflection point, an incrementally bullish Wedbush analyst said in a new report. 

The Analyst 

Wedbush’s Christopher Svezia maintained an Outperform rating on Nike and raised the price target from $75 to $82.

The Thesis

With accelerating growth in North America, possible international growth and gross margin tailwinds, Svezia said Nike should exceed expectations through fiscal 2019. (See the analyst's track record here.)

Although the market remains wary of the promotional environment and battle for market share, Svezia said Nike will see real progress on several fronts in 2018, including inventory management and product and engagement, which should ultimately translate into long-term mid-single digit growth. Fourth-quarter sales should come in ahead of consensus at $9.4 billion and EPS of 68 cents and are driven by higher sales and better margins, the analyst said. 

In Europe, Nike is likely to take share, and Svezia forecast sustained double-digit growth in China. Progress in North America around product and speed could help improve sales opportunities in international markets as well, the analyst said. 

Nike will return to gross margin expansion for the first time in eight consecutive quarters, with FX pressure, direct-to-consumer and average selling price turning to "a more meaningful tailwind," Svezia said.  

“In all, NKE’s multiple accelerates as sales momentum builds and (gross margin) rates are expanding, which in our view are key factors in FY19." 

Nike is set to report fourth-quarter earnings June 28. 

Price Action

Nike shares are up nearly 1 percent, at last check trading at 74.74.

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