Nike’s Long-Term Story Intact, Raises Price Target to $185: Morgan Stanley

Morgan Stanley raised their stock price forecast on Nike to $185 from $172 and said near-term headwinds well flagged but long-term story intact.

The world’s largest athletic footwear and apparel seller Nike is expected to report its fiscal fourth-quarter earnings of $0.51 per share, which represents year-over-year growth of 200% from a loss of $0.51 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would deliver +33% y/y revenue growth. Nike shares slumped about 8% so far this year.

Analyst Comments

“Revenue is a well-understood risk in 4Q, & our predictive model’s outlook has improved. Our online discount tracker suggests GM upside, & SG&A guidance appears conservative, which could drive an EPS beat. ST risk appears priced in per YTD underperformance. Stay OW & raise price target to $185 on lower WACC,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

NKE is in the early innings of transition from a wholesaler to a DTC brand. Success would make it one of few to benefit from the shift to eComm (~15% of ‘20 sales). Its DTC business (~33% of ‘20 sales) should ignite its next phase of margin-accretive revenue growth, driving a 29% 5Y EPS CAGR. NKE also stands to benefit from advancing global consumer activewear demand (due to the WFH-induced preference for comfort-oriented apparel/footwear and increased focus on health & wellness). NKE’s strategic portfolio decisions, tech investments, and supply chain innovation also create LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Nike Stock Price Forecast

Eighteen analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $166.94 with a high forecast of $192.00 and a low forecast of $140.00.

The average price target represents 28.02% from the last price of $130.40. Of those 18 analysts, 15 rated “Buy”, two rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $185 from $172 with a high of $354 under a bull scenario and $97 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear company’s stock.

Several other analysts have also updated their stock outlook. UBS cut the price target to $170 from $175. Jefferies raised the target price to $192 from $140. Barclays cut the target price to $165 from $174. Cowen and company slashed the price target to $145 from $155.

“There are many moving pieces in the NKE model including an easy comparison from Q4:20 and shipment shifts into Q4:21 but our proprietary data on China through May 2021 is pointing to a continued deceleration in Tmall GMV, negative social media sentiment in China, and poor Baidu search trends. FY22 consensus EPS estimates appear too high. We are lowering our price target to $145,” noted John Kernan, equity analyst at Cowen.

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