Driving Nike's Competitive Edge: Analyst Highlights Industry-Leading Growth And Ad Spend

BMO Capital Markets analyst Simeon Siegel reiterated the Outperform rating on Nike, Inc. NKE, with a price target of $110.

Siegel thinks NKE's size and budget prove a key long-term competitive advantage. 

The brand has no parallel in history when it comes to N.A. size/scope. With a leading ad budget fueling industry-leading dollar growth, the analyst expects ongoing gains for Nike.

The $110 target price is based on ~26x of the analyst's FY25 EPS estimate.

For FY23, the analyst expects Adj. EPS of $3.23; for FY24, the analyst forecasts Adj. EPS of $3.70; for FY25, the analyst forecasts Adj. EPS of $4.22.

If NKE can accelerate top-line growth and gain a larger upside to margin improvement, it could earn ~$5.50 in EPS.

However, the analyst writes there was a notable negative inflection in Footwear Units (driven by material worsening in N.A.), as depicted in the company's latest 10Q report, while Apparel Unit declines worsened (but ASP growth accelerated).

With significant upticks in Corporate/Overhead recently, Corporate continues to represent a growing pressure weighing down EBIT margin. 

If NKE's growth stagnates and margin improvement does not gain traction, it could earn ~$2.50 in EPS.

Price Action: NKE shares are trading higher by 0.71% to $97.57 on the last check Tuesday.

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