DA Davidson maintains Nike stock Buy rating, $273 target

On Monday, DA Davidson reiterated a Buy rating for Nike (NYSE:NKE) with a fixed price target of $273.00. Nike’s stock, currently trading at $67.05 and down nearly 10% year-to-date, has faced pressure following disappointing guidance. According to InvestingPro data, 16 analysts have recently revised their earnings estimates downward. Despite this, DA Davidson sees a silver lining for Dick’s Sporting Goods (NYSE:DKS), given Nike’s positive performance in certain areas.

Nike’s North American business outperformed expectations, declining by only 4% compared to the anticipated 11% drop. This marks an improvement from previous quarters, which saw decreases of 8% and 11%, respectively. The $99.15B market cap company’s North American wholesale revenues experienced a year-over-year increase of 3%, as reported on their earnings call. This rise is notably better than the past two quarters, which saw declines of 1.2% and 10.7%. This is particularly relevant for Dick’s Sporting Goods, as they now represent an estimated 16% of Nike’s North American wholesale revenues, a significant increase from 9% five years prior.Want deeper insights? InvestingPro subscribers have access to over 30 additional premium metrics and exclusive analysis for Nike, including detailed Fair Value calculations and comprehensive financial health scores.

Furthermore, Nike is actively working to clear its inventory, cooperating with retail partners to facilitate product movement. This strategy, which includes Nike absorbing discounts, is expected to contribute to lower gross margin forecasts for the company, which currently stands at 44%. However, it is anticipated to be advantageous for retailers like Dick’s Sporting Goods, who are likely to see increased volumes from more competitive pricing without a corresponding hit to their margins.

In other recent news, Nike’s fiscal third-quarter earnings results have drawn varied reactions from analysts. Stifel analysts highlighted that Nike’s revenues reached $11,269 million, surpassing their expectations, with earnings per share (EPS) at $0.54, exceeding the anticipated $0.22. However, UBS analysts expressed concerns about the outlook, reducing their price target to $66 from $73, citing uncertainties in Nike’s earnings projections. Meanwhile, Truist Securities adjusted their price target for Nike to $82 from $90, maintaining a Buy rating and emphasizing the company’s long-term potential despite short-term challenges.

Baird analysts also revised their price target to $99 from $105 while maintaining an Outperform rating, recognizing weaker sales but noting encouraging signs in product and marketing initiatives. Needham analysts lowered their price target to $75 from $80, maintaining a Buy rating and acknowledging the challenges in Nike’s turnaround strategy. Despite these varied assessments, analysts generally recognize Nike’s strategic efforts to address market challenges.

These recent developments indicate that while there are differing views on Nike’s immediate prospects, there is a consensus on the potential for recovery through strategic initiatives. Investors will likely continue to monitor Nike’s progress as it navigates its turnaround plans and aims for long-term growth.

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