Nike To Report Q1 Results After Kaepernick Ad Launch: A Sell-Side Preview

All eyes are on Nike Inc NKE sales heading into its first-quarter earnings report Wednesday, Sept. 25, the first since the company launched its "Just Do It" campaign featuring Colin Kaepernick. Here's what analysts are saying ahead of the print. 

Baird Stays Bullish

Baird analyst Jonathan Komp said Nike's recent advertising decisions have attracted unprecedented attention, and the company struck all-time highs on Google's search index. The athletic apparel maker's Q1 will be less exciting, the analyst said.

“Based on the strong recent results and North America inflection, we are confident NKE is responding to broader challenges with a transformative combination of innovation, enhanced digital services [and] experiences and advanced manufacturing,."

Komp maintained an Outperform rating on Nike with a $90 price target.

Susquehanna: Nike Positioned To Hit $50B 2023 Revenue Target

Susquehanna analyst Sam Poser remains bullish ahead of the Q1 report. 

The sell-side firm's proprietary checks indicate that Nike's new apparel and footwear offerings are gaining traction, its speed-to-market initiatives are just beginning to bear fruit, the analyst said. The Jordan brand's struggles may be behind Nike, and the nameplate should turn from a headwind to a tailwind by the end of Q2, Poser said. 

"The improving trends position Nike well to hit its $50-billion revenue target on a TTM basis prior to the end of [2023]," said Poser.  

Susquehanna maintained a Positive rating on Nike and raised the price target from $93 to $100.

Guggenheim Raises Price Target 

Guggenheim analyst Robert Drbul said Nike shares are poised for gains. The analyst reiterated a Buy rating on Nike and raised the price target from $90 to $100. 

Nike has returned North America to a healthy "pull" market via improved inventory, Drbul said. The brand's marketing muscle generates a greater revenue-to-marketing-spend ratio than competitors, he said. 

"When we consider NKE's formidable demand creation budget, we believe NKE is well-positioned to continue to drive consumer demand and remains well-connected with its diverse consumer base. Nike has demonstrated its keen ability to effectively invest in marketing globally with its vast resources." 

Needham Expects Earnings Beat 

Needham analyst Rick Patel maintained a Hold rating on Nike. He projects the retailer's positive momentum will fuel an earnings beat, but said the stock's premium valuation keeps Needham on the sidelines.

B Riley Remains Neutral, Raises Price Target

B. Riley FBR analyst Susan Anderson reiterated a Neutral rating on Nike and raised the price target from $76 to $84. Investors will be looking for details on the performance of the Kaepernick marketing campaign, she said. 

“We like Nike’s innovation pipeline, international runway, long-term margin catalysts and the turn we are seeing in North America — but we remain on the sidelines given valuation,” the analyst said. 

Morgan Stanley: 'Nike Is A Beneficiary Of E-Commerce Disruption' 

Morgan Stanley analyst Lauren Cassel maintained an Overweight rating on Nike with an $88 price target, and said she expects an earnings beat Wednesday beat due to strong top-line results and growing gross margins in light of a greater mix shift toward direct-to-consumer.

“North America will remain a key focus after the region returned to growth in the fourth quarter of 2018 following six quarters of sales deceleration and three quarters of negative growth,” the analyst said. 

Morgan Stanley forecast 3.8-percent growth in North America as adidas AG (ADR) ADDYY's momentum continues to slow.

“Unlike most of retail, Nike is a beneficiary of e-commerce disruption primarily through its higher-margin DTC business, which we forecast will drive 85 percent of Nike’s growth over the next four years,” Cassel said. 

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Photo courtesy of Nike.