5 Upcoming Catalysts For Nike Bulls

Christian Buss of Credit Suisse reiterated his Outperform rating on Nike Inc NKE as he becomes increasingly bullish on Nike given a series of incremental revenue catalysts, implying the recent market share losses will moderate in 2017.

Following are the five incremental revenue catalysts:

• 1. “Product Innovation Platform: Air VaporMax.”
• 2. “Rationalization Of Pricing Architecture For Premium Product.”
• 3. “Celebrity Collaborations Added To The Roster.”
• 4. “NBA License Takeover In 2H17.”
• 5. “Moderating Competitive Headwinds from Under Armour Inc UAA, possible adidas AG (ADR) ADDYY.”

Nike is reintroducing Air Max technology through Air Max Day on March 26, which celebrates the 30th anniversary of the Air Max 1. The analyst believes Air VaporMax looks to be the next big product innovation after a five year gap.

Meanwhile, Buss believes inventory rationalization in the second half and mix shift towards higher-margin DTC sales should benefit earnings growth. The analyst noted that the online sentiment data too looks encouraging for the brand as well.

Q3 Expectations

For the third quarter, Buss expects global constant currency futures up 4-5 percent year-over-year and sees total North American futures up 1.4 percent, a rebound from the negative futures growth in the second quarter. Nike reports its third quarter results on March 21.

In addition, the analyst said China futures growth remains in double digits at up 11 percent, with Western Europe rising 5 percent.

“In the near-term, we are more positive than the street in our 3Q17 and FY17 revenue and EPS expectations. Longer term, we believe the company can maintain high-single digit topline growth and teens EPS growth, making it a true standout in the softlines space,” Buss wrote in a note.

Buss raised his price target to $67 from $60.

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image: Emily Elconin