will release its fiscal fourth quarter results later this month, but Cowen & Co. says the stock is buy now as the economy is on the threshold of a “decade of digital transformation.”
Analyst John Kernan reiterated an outperform rating on Nike (ticker: NKE) stock on Monday and raised his price target to $110 per share from $85. He wrote that expectations for the next quarterly report might be “slightly optimistic,” but he’s more interested in the “accelerating shift to Nike.com,” a trend that strengthens the company’s connection to its core customer base. while taking advantage of the margins.
Between Nike.com and the SNKRS app, Nike’s e-commerce business has seen a compound annual growth rate of about 35% over the past five years, Kernan said. More recently, both of these channels have seen active users “at near triple-digit run rates.” Kernan wrote that the company’s increased investment in its digital presence is paying off, and that’s good news for Nike as a whole. Online sales tend to generate higher earnings before interest and taxes (Ebit) than in-store sales.
Ultimately, growing consumer preference for online shopping could add 2 percentage points to Ebit margins by Nike’s fiscal year 2024. A 29% compound annual growth rate in Nike’s e-commerce revenue over the next four years, he estimated, would bring those sales to $15. billion by fiscal year 2024.
Shares of Nike, down 2.5% in 2020, have held up better than many other consumer discretionary brands, which have felt the pinch from falling demand and physical store closures. For several years, the company has embarked on direct-to-consumer sales, a strategy that emphasized e-commerce even before it became the lifeline of many retailers during the pandemic.
Cowen isn’t alone in thinking Nike is on the verge of a multi-year rally. Nike’s previous earnings report in March satisfied investors even as the coronavirus began to have a crushing impact on the company. For the bulls, the next report will likely be less important than what Nike has to say about its longer-term goals.
Shares of Nike were up 0.8% at $99.41 on Monday afternoon. the
was up 0.4%.
Write to Teresa Rivas at [email protected]