'Nike Continues To Expand The Market': Analysts Applaud Q1 Beat

Nike Inc NKE shares are in all-time high territory after the apparel company posted a first-quarter earnings beat Tuesday.

Wells Fargo Weighs In

Although expectations were very high heading into the first quarter, Nike was able to clear the bar with an earnings report that was solid from top to bottom, said Wells Fargo analyst Tom Nikic.

Nike is fairly valued, the analyst said. 

“All in, the company clearly has a lot of momentum, but with the stock trading in the $91-$92 range in the Sept. 24 aftermarket, we think this is fairly reflected valuation,” Nikic said.

Wells Fargo maintained a Market Perform rating and raised its price target from $85 to $91.

Credit Suisse Raises Price Target

Credit Suisse analyst Michael Binetti said he continues to be impressed by Nike’s ongoing global brand momentum, fueled by outperformance from international, digital and scaling innovation platforms.

“Importantly, in a tough macro, we think Nike is one of a few companies that can confidently point to an acceleration in near-term revenue trends,” the analyst said. 

Credit Suisse raised its 2020 earnings estimate from $2.91 to $3.

Credit Suisse maintained an Outperform rating and raised the price target from $97 to $105.

Stifel Sees Multiyear Period Of EPS Growth

Stifel analyst Jim Duffy said that, within 12-18 months, he expects Nike's gross margins to return to 46% and modest SG&A leverage to puts mid-teens EBIT margins in sight.

With high single-digit/low double-digit growth, improving margins and share repurchases, Stifel expects a multiyear period of EPS growth in the high teens to low 20s, the analyst said.

Stifel maintained a Buy rating and raised the price target from $96 to $106.

PiperJaffray: North America Revenues Affected By Timing

PiperJaffray analyst Erinn Murphy said that, although North American revenues were light for Nike, she sees jersey comps, footwear launch timing and an extended back-to-school season as reasonable explanations.

“Importantly, Nike sees North American growth accelerating sequentially across the balance of [the] year. Despite greater currency headwinds, incremental tariff pressures and a more uncertain backdrop than 90 days ago, Nike raised underlying and reported FY20 guidance,” the analyst said. 

The Zoom Freak 1 became the largest basketball launch in Nike basketball history, she said. 

Piper Jaffray maintained an Overweight rating and raised the price target from $97 to $101.

Wedbush Sees Strong Path Ahead

While the second-quarter outlook came in below expectations, numerous areas of upside opportunity remain for both the second quarter and incrementally stronger 2020 outlooks,

Wedbush analyst Christopher Svezia said in a Wednesday note. 

“In the end, Nike continues to expand the market and drive consumer industry innovation as there is upside to its calendar year sales outlook that already likely strengthened by up to several basis points, with FY20 EPS likely to move higher as well,” the analyst said. 

Wedbush reiterated an Outperform rating and raised the price target from $96 to $100.

Morgan Stanley Maintains Overweight Rating

Morgan Stanley analyst Kimberly Greenberger said the first quarter was set to be Nike’s most challenging in fiscal 2020, yet the company beat across every line item and exhibited broad-based strength across geographies and categories.

“While a piece of 1Q’s beat was timing shift & tax, majority flows through benefitting FY2020 (and) momentum suggests further upside,” the analyst said. 

Morgan Stanley maintained an Overweight rating with a $108 price target.

Despite Wall Street raving about Nike’s results, Matt Powell of the NPD Group told Benzinga that “U.S. wholesale remains a weak and vulnerable point for the brand.”

Nike shares were up 4.16% at $90.81 at the close Wednesday. 

Related Links:

Lululemon Will Enter The Shoe Game: Here's Why It's Important

Footwear Expert: Tariffs Hurt Nike In A Different Manner Than You Think

Photo courtesy of Nike.