Nike
stock was rising Monday after an analyst cited confidence in the future of the athletic clothing brand, specifically in its China performance, despite broader economic pressures.
Citi
analyst Paul Lejuez upgraded shares of
Nike
to Buy from Neutral and increased his price target on the stock to $135 from $110 on Monday. This upgrade comes 10 days before the company reports second-quarter financial results.
“Top-line challenges remain, but we are more optimistic about NKE’s ability to protect EPS in F24/F25 despite a choppy macro,” Lejuez said in a research note. The analyst is confident about what a decline in freight costs, lower promotions, and direct to consumer strength will do for gross margins. He’s also optimistic in Nike’s 2024 product lineup for the Paris Olympics and the company’s position in China.
Nike, a 2023 Barron’s stock pick, hasn’t had an easy year. Shares have declined 0.9% in 2023 amid inventory problems and concerns of an economic slowdown in China. However, in another note published earlier on Monday, Lejuez said that Citi conducted a quarterly survey of 1,000 Chinese consumers and 1,600 North American consumers to “gauge the momentum of the Nike brand” in these areas, which showed promise.
“Our China survey suggests consumers are feeling slightly more optimistic about their disposable income,” he said. “…In NAM [North America], our survey results suggest consumers are feeling slightly better about their disposable income vs Sept, though inflation is still weighing on the consumer.”
Shares of Nike gained 2.5% Monday to $118.85. The
S&P 500
was up 0.1%.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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