Is Nike's Stock Still A Buy At All-Time Highs? The Street Debates

Is Nike's Stock Still A Buy At All-Time Highs? The Street Debates

Nike Inc NKE reported fiscal second-quarter results that came in better-than-expected and sent shares running to new all-time highs.

The Analysts: Needham analyst Rick Patel maintains a Buy rating on Nike's stock with a price target lifted from $149 to $165.

Raymond James analyst Matthew McClintock maintains an Outperform rating on Nike with a price target lifted from $140 to $155.

KeyBanc Capital Markets analyst Matthew DeGulis maintains an Overweight rating on Nike with a $174 price target.

Morgan Stanley analyst Kimberly Greenberger maintains an Overweight rating on Nike with a price target lifted from $165 to $176.

Quarter Highlights: Nike reported EPS of 78 cents in the fiscal quarter versus the Street's estimate of 63 cents while sales of $11.24 billion were 2.2% better than expected.

Patel noted North America sales growth was in line with expectations at 0.6% year-over-year to $4 billion as digital sales growth of more than 100% more than offset weakness in other areas like the transition of the NFL license business to Fanatics. Total digital sales were up 80% in the quarter.

Sales in China were up 24% (19% ex-fx) versus expectations of 9% growth. This marks the strongest quarter of growth since November 2018 and is attributed to strong performance during Singles Day along with rising traffic in stores.

Digital Leader: Nike's investments in its digital business coupled with strong brand momentum and financial flexibility should result in continued market share gains after fiscal second-quarter digital sales growth "far exceeded expectations," McClintock wrote in a note.

The company's momentum could translate to gross margin gains moving forward although it was down 90 basis points in the quarter at 43.1%. A full-price selling environment is likely to resume in the back half of 2021 from strong demand. Also, Nike already spent $220 million of the $315 million in reorganization costs.

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