Nike Remains A Top Pick For 2017

Nike Inc’s NKE FQ3 2017 results exhibited improved sequential gross margin stability and a robust top-line performance.

“We are particularly bullish on current product cycle,” Jefferies’ Randal Konik said in a report, while adding that the company is the main beneficiary of “a strong retro trend.”

While maintaining a Buy rating and $75 price target, Konik mentioned the stock remains the “Top Pick” for 2017.

Product Leading The Way

Traffic trends are up at athletic and sporting goods retailers and is likely to continue increasing.

“This, combined with product innovation (e.g. Air Max in Running), market share gains in Bball, and, as evidenced by our data work, a growing retro trend, fortifies Nike's solid positioning in the category,” Konik commented.

Adidas AG (ADR) ADDYY seems to be losing market share to Nike in the Running category.

Related Link: Nike's 'Triple Double' Not Enough To Pull Out The Win In Q4

Margin Story

Nike’s gross margin may come under pressure due to digital expansion and promotions in North America. The analyst added that currency headwinds would likely be a bigger impact in FY2018.

Although Nike’s futures were down 4 percent, this isn't much of a concern, since this metric is “increasingly less correlated with total growth,” Konik said.