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Analysts on Wall Street are signaling that Nike may be reaching a turning point. The sneaker behemoth reported mixed fiscal first-quarter results on Thursday, with earnings of 94 cents per share topping forecasts, while revenue of $12.94 billion fell short. Analysts polled by LSEG had anticipated Nike would earn 75 cents per share on $12.98 billion in revenue. It was Nike’s first revenue miss in two years. Sales slipped 2% in the U.S., which is Nike’s largest market, but rose in every other region where the company operates. Nike also reiterated its full-year guidance for mid-single-digit revenue growth. It sees gross margins improving by 1.4 to 1.6 percentage points. But the earnings beat and margin growth were enough to alleviate pressure to the stock. Shares of Nike had fallen roughly 23% in 2023 heading into Thursday’s earnings report, but have added as much as 11% in trading on Friday. NKE YTD mountain Nike stock. “We see NKE’s brand momentum across geographies as sustainable and providing insulation to macro volatility and supporting high-single-digit to low-double-digit top-line growth,” JPMorgan analyst Matthew Boss wrote on Friday. “We view this, combined with continued gross margin expansion (increased full-price selling, favorable DTC mix), driving multi-year mid- to high-teens sustainable EPS growth.” The firm maintains an overweight rating on Nike stock, and forecasts nearly 53% upside from Thursday’s $89.62 close. Here’s why analysts aren’t overly concerned about the revenue miss. UBS analyst Jay Sole reiterated a buy rating on Nike stock on Friday, accompanied by a $150 per share price target, which equates to about 67% upside. The analyst says short-term pressure on the stock is poised to turn around, and the long-term picture for the company is upbeat given its reinvestments. “Nike’s long-term outlook is attractive, in our view. We continue to think Nike’s investments in product innovation, supply chain speed, and digital will unlock a multiyear period of above average growth,” Sole said. “Plus, we believe Nike has the brand strength, strategy, skills, resources, and balance sheet to outperform peers through a recession.” Goldman Sachs analyst Kate McShane also maintained a buy rating on Nike following quarterly results, which she says were “better-than-feared.” McShane has a $136 per share price target on Nike stock, which implies more than 51% upside. Despite a near-term “choppy” outlook for Nike growth, the analyst says the company is well positioned to navigate headwinds including “tough comparisons” and stiffer competition. “Looking ahead, NKE’s commentary on innovation was strong, with management calling out plans for accelerating innovation into the Paris Olympics and comprehensive evolution of the Air Max platform across both performance and lifestyle,” McShane said. Morgan Stanley’s Alex Straton reiterated an overweight rating on Nike with a $126 per share price target, or about 41% upside. The analyst said Nike’s consistent forecast helped her maintain a positive outlook on the stock. “We think NKE is set up for another beat in 2Q, as well as a potential ’24e guidance raise given the low 2H bar, clear re-stocking opportunity, & numerous 2H margin tailwinds,” Straton said. Citi analyst Paul Lejuez was more cautious in his take, maintaining a neutral rating on Nike with a $100 per share price target, or about 12% upside. He views Nike as not yet “de-risked” after quarterly results, and said the overall quarter was “underwhelming.” “Despite an uninspiring [quarter], there were no alarm bells, which is driving the stock back to the mid $90s, though we believe further upside is limited,” Lejuez said. — CNBC’s Michael Bloom contributed to this report.
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