Nike shares soar as investors applaud North America sales rebound

FAN Editor
FILE PHOTO: Nike (NKE)'s logo is seen in Los Angeles
FILE PHOTO: The logo of Nike (NKE) is seen in Los Angeles, California, United States, April 12, 2016. REUTERS/Lucy Nicholson/File Photo

June 29, 2018

By Aishwarya Venugopal

(Reuters) – Nike Inc <NKE.N> shares on Friday rose 10 percent premarket and were set to open at a record high, after the world’s largest shoe maker saw a major sales rebound at its North America business and forecast strong growth for 2019.

At least 14 Wall Street analysts raised their price targets following Nike’s better-than-expected quarterly results, with Susquehanna the most bullish, raising its target by $14.

“Nike delivered the closest thing to a complete game for a public company,” said Barclays analyst Matthew McClintock, who boosted his target to $85 from $80.

The company’s focus on its digital platform and launch of sneakers, such as Air Max 270 and Epic React, not only helped it fight off competition from German rivals Adidas <ADSGn.DE> and Puma, but also deliver on its promise of a significant reversal in its home market.

The Oregon-based company is also gaining on the resurgence of ’90s fashion trends that is helping boost sales of its classic sneakers. Industry research shows that sneaker sales rose 10 percent globally last year.

Sales at its North America business rose 3.3 percent in the quarter after having fallen for most of the year.

“The Nike story is officially back at this point and investors will no longer have an opportunity to ‘wait for a better entry point’ as all signs point to an acceleration,” McClintock said.

Analysts at Credit Suisse said strong results prove that several years of distribution disruption, bloated inventories, lackluster innovation, and market share losses are in the past.

The company also said it expects 2019 revenue to be in the high single-digit range, compared with its earlier forecast of mid-to-high single-digit growth. It also announced a $15 billion buyback program.

“Nike’s business is beginning to inflect in NA, and we expect the company to continue to recapture the share it has lost to Adidas <ADSGn.DE>,” Jefferies analysts said in a note titled ‘Share Gains Back = ADI-os!’

The Dow component’s stock has risen nearly 15 percent this year, while Adidas’ shares have gained 10 percent. Nike trades at 26.5 times forward earnings, versus Adidas’ 20.50 times.

Nike’s class B shares were up 9.7 percent at $78.67 in premarket trading and were the third biggest percentage gainers among New York Stock Exchange listed companies.

“They are becoming a halo brand,” Jessica Ramirez, retail analyst at Jane Hali & Associates.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sweta Singh)

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