Analyst Sizes Up Nike, Finds A Buy Rating Still Fits

Shares of Nike Inc NKE were trading lower by nearly 3 percent early Wednesday morning after the company's earnings report Tuesday was mixed. But many on the Street continue to see a bullish story, including the Buckingham Research Group's Scott Krasik.

Krasik maintains a Buy rating on Nike's stock with an unchanged $64 price target based on a favorable long-term outlook. The fact is many investors have "become too myopically focused on near-term noise," including the company's weak margins in the quarter and second-quarter guidance, which fell short of consensus estimates.

Nike's long-term story remains solid as the company will continue to benefit from the growing trend of healthy and active living, Krasik said (see his track record here). The company is capitalizing on this trend by working on many innovative products in its pipeline, including its first digitally connected apparel product, NBA Connect jerseys and other footwear innovations.

Looking all the way forward to fiscal 2021, Nike could see $3.50 or more per share in EPS power based on sales stabilizing at a mid-single digit to a high-single digit rate with 50 basis points of annual gross margin expansion and no SG&A leverage. Also, over the same time period Nike could buy back around 2 percent of its shares outstanding on an annual basis and generate over $16 billion in free cash flow.

At time of publication, shares of Nike were down 4.19 percent at $51.45.

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