Why Nike Stock Jumped Today


What happened

Shares of Nike (NKE 4.68% ) rose 4.7% on Thursday after two analysts issued bullish ratings on the sportswear giant.

So what

JP Morgan analyst Matthew Boss reiterated his overweight rating on Nike shares. Following his meeting with management, he sees his share price climb about 23% to $164.

Despite a rise in COVID-19 infections that prompted Chinese authorities to reinstate lockdowns in several major cities, Boss expects Nike sales in China to strengthen in the fourth quarter. He also thinks the footwear titan’s gross margin could improve as consumer demand rebounds and inventory levels remain lean.

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UBS Analyst Jay Sole shared Boss’ optimistic view on Nike’s outlook. Sole repeated his buy rating on Nike shares after talking with chief financial officer Matt Friend.

Sole expects Nike to generate strong e-commerce sales in North America. He also believes coronavirus-related disruptions factor heavily into Nike’s somewhat conservative single-digit sales growth forecast for fiscal 2022, a multi-year period of above-average growth.

Now what

Nike’s revenue rose 5% to $10.9 billion in the third quarter, which ended Feb. 28. A 19% jump in digital sales helped fuel the gains.

Even better, Nike’s gross margin increased by 1 percentage point to 46.6%, in part due to reduced discounts during the period. Higher direct sales, which tend to be more profitable than the company’s wholesale business, also helped Nike’s margin expansion.

If Boss and Sole are correct, investors can expect further improvements in these financial metrics over the coming quarters.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.


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