While the overall markets have switched to a bearish outlook in recent weeks, Nike, Inc. (NKE – Research Report) shows how a well-positioned company can still post significant gains. Nike has a popular product line and a well-considered marketing plan, and has leveraged both to great effect. We’ll dive into the company’s recent news, and then use the TipRanks analyst database to see what top-rated market analysts have to say about it.
A Perfect Quarter in an Imperfect World
Start with the earnings report. Nike reported Q2 FY19 earnings on Dec 20, and results were far above Wall Street’s expectations. EPS came in at $0.52, where the street had anticipated $0.46. Total revenues hit $9.37 billion, beating the $9.18 billion estimate by $190 million dollars.
Those were just the top-line numbers. Nike’s Q2 performance was excellent all across the board. Nike’s Singles’ Day sales – the biggest online sales day of the year in China – showed a 40% increase from last year, and Nike sales in the China market grew 26%, the most robust of any geographical area. North American sales were up 9%, and Middle Eastern sales were up 8%. Net income for the quarter totaled $847 million, an increase of 10% from last year.
Some industry market watchers were leery of Nike heading into the Q2 earnings call. The company’s biggest headlines during the quarter came, not from any blockbuster sale, but from a controversial decision to center a marketing campaign around Colin Kaepernick. The quarterback, who’s currently not signed with any NFL team, gained notoriety from his decision to protest police treatment of black men, and ‘take a knee’ during the national anthem.
It is clear that Nike’s marketing decision did not harm the company. As the old adage goes, any publicity is good publicity.
Growth and income numbers like these are bound to help any company. NKE stood at $67 on Dec 20; by the close of trading on Dec 21, the stock was up to $72, for a gain of 7%. You can see the spike clearly on NKE’s 5-day price chart, where the market opens on Dec 21.
That same day, the Dow Jones lost almost 2%, and the NASDAQ fell by 3%.
The Analysts Weigh In
Nike picked up 12 new analyst reviews in the wake of the Q2 earnings blowout, of which 8 were ‘buy’ ratings. Four of these deserve our special attention.
The first is J.P. Morgan’s Matthew Boss (Track Record & Ratings), who upgraded his rating on NKE from ‘neutral’ to ‘overweight.’ His neutral rating had held for 18 months; the sudden change was prompted by “rising sales, and expanding earnings before interest and taxes margin, and higher gross-profit guidance.” Boss also described the current share price as “an attractive entry point.” His price target of $85 suggests a 17% upside to the stock.
Mitch Kummetz (Track Record & Ratings), from Pivotal Research, also upgraded NKE, shifting his view from ‘hold’ to ‘buy.’ He cited gains in Nike’s market share and gave the stock a 10% upside with an $80 price target.
Two more reviews deserve a closer look, as they come from the highest-rated analysts to look at NKE since the Q2 report was released. Susquehanna analyst Sam Poser (Track Record & Ratings), ranked #527 overall in the TipRanks database, set a ‘Buy’ rating on NKE and gave a $92 target price. In his comments, he said, “Improvements in the scarcity model, the speed of the product pipeline, and digitally-driven consumer engagement are still in their early stages and should continue for the foreseeable future.” His target implies a 27% upside from current price levels.
Finally, the most recent review of NKE stock comes from Jonathan Komp (Track Record & Ratings), writing at Baird. Komp is rated #188 on TipRanks, out of 5,079 analysts covered. He says of this stock, “NKE’s Q2 results demonstrated continued global momentum supported by a range of initiatives spanning product, digital, and speed/supply chain that are driving strong results… [W]e remain confident in NKE’s ability to sustain attractive earnings growth.” Komp’s price target on NKE is $87, giving the company a 20% upside potential.
Looking at the best rated analysts, Nike holds a ‘Strong Buy’ consensus rating. The average price target, $88, gives a 22% upside compared to the current share price of $72.
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