Nike Inc. stock jumped 10.2% on Wednesday after becoming one of the few companies to offer guidance, forecasting full-year revenue to rise between high and double digits.
Stock performance gives mainstream ETFs a boost.
Previously, Nike NKE,
intended for income to be “fixed” for the year.
Nike reported fiscal first-quarter earnings and revenue that beat analysts’ expectations for a “ho hum” quarter.
Nike has made business decisions, such as reducing wholesale distribution at retailers like Dillard’s Inc. DDS,
and AMZN from Amazon.com Inc.,
The Zappos e-commerce site and a staff reorganization, which the company says will have short-term repercussions.
The sports giant expects flat gross margins year over year and flat selling, general and administrative expenses.
“Stronger-than-expected demand for our brands will be limited in the near term due to the sourcing decisions we have made in the face of the pandemic, with second-half growth expected to be up significantly from the prior year,” said chief financial officer Matthew. Ami on the earnings call, according to FactSet.
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“Our gross margin outlook will continue to be driven by the priority given to returning to normalized inventory levels by the end of the second quarter. full, but we anticipate continued higher markdown activity at our outlets to maintain conversion rates should traffic decline.
Analyst reaction was upbeat, with a number of research groups raising their price targets on Nike shares.
“Nike’s Rhythm 1Q continues to show how the company’s size and scale deliver long-term structural competitive advantage by deploying its moat-digging budget in research and development and marketing to deepen the portfolios of customers, extending its competitive set of athletic peers, to anyone selling footwear and apparel, while enhancing its direct and wholesale distribution,” wrote BMO Capital Markets analysts led by Simeon Siegel.
BMO rates Nike shares to outperform with a price target of $134, down from $100 previously.
“Obviously stocks are expensive, but they are expensive for a reason, and we expect them to continue to rise.”
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UBS analysts think Nike stock can continue to outperform. Shares are up 27% in the past three months, compared to a 5.2% rise for the Dow Jones Industrial Average DJIA,
Year-to-date, Nike stock is up 25.5%.
“The key is that Nike’s transition to digital selling is happening much faster than expected,” said analysts led by Jay Sole. “Importantly, we believe this transformation is just beginning and will drive better-than-expected sales growth and margin expansion in the years to come.”
UBS is pricing the Nike stock purchase with a price target of $152, down from $127 previously.
Nike’s price target was raised to $150 from Bank of America’s $130. Cowen analysts raised their price target to $145 from $134. And Raymond James raised his price target from $121 to $140.
“The performance proves that Nike’s focus on innovation and digital strategies are paying off in today’s environment, while the renewed focus on organizational efficiency, improved execution and return on ad spend is likely to fuel optimism about multi-year margin potential,” Baird wrote. analysts in a note.
Baird raised his price target from $115 to $135. However, analysts rate Nike stock neutral, erring on the side of caution.
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“While strongly encouraged, we see a risk of overshooting sentiment on the upside of management’s re-confirmed long-term targets and would avoid chasing the stock in the short term.”