Shares rose on Friday after Baird said in an update that the athletics giant’s recent underperformance was a buying opportunity.
Analyst Jonathan Komp raised his rating on Nike (ticker: NKE) to outperform from neutral, while maintaining his $150 price target on the stock. Nike rose 1.7% to $130.87 in the latest trades, rebounding from a sell-off linked to the human rights dispute in China.
Komp was sidelined from Nike for more than two years, in part because of the stock’s valuation, although he admired the company’s product innovation, shift to direct-to-consumer sales and market dominance. However, with shares down more than 9% year-to-date, he sees Nike now “providing a more compelling entry point”.
Of course, there are reasons for this delay. The company reported mixed third-quarter results and was embroiled in the diplomatic row over alleged human rights abuses in China against the Uyghur minority group. The United States, Britain, the European Union and Canada have imposed sanctions on Chinese officials, while China’s ruling party and some citizens have called for a retaliatory boycott against Western brands.
Still, Komp argues that these headwinds seem temporary and are already being reflected in the stock’s valuation. The pandemic and supply chain disruptions that hampered its quarter are expected to dissipate. And while the situation in China “requires monitoring”, he argues that “Nike’s legacy of operations in the country (starting in 1980), strong recent momentum…and history of navigating controversial social issues will help limit lasting impacts”.
Indeed, assuming there is no long-term disruption in China, he argues that the company can anticipate $5 per share by FY2024, up from $1.60 in 2020, aided by its ability to sell more items at full price, its direct outreach to consumers. , and expanding margins.
Other analysts have also been bullish on the stock recently, and its earnings were good enough for one to raise its price target on
Corrections & enhancements:
Baird updated Nike’s stock on Friday. A previous version of this article incorrectly mentioned the name of the company.
Write to Teresa Rivas at [email protected]