TD Cowen upgrades Nike stock rating to Buy on margin recovery potential

Investing.com - TD Cowen upgraded Nike (NYSE:NKE) from Hold to Buy on Wednesday, raising its price target to $85.00 from $62.00. The sports apparel giant, currently valued at $108.7 billion, trades at 33.9 times earnings, with analyst targets ranging from $38 to $120. According to InvestingPro data, Nike maintains strong financial health with a ’FAIR’ overall rating.

The investment firm cited three key factors supporting Nike’s turnaround: its iconic global brand status with potential for $4+ in earnings per share and $6 billion in free cash flow, execution by the new management team, and improving data trends. As a prominent player in the Textiles, Apparel & Luxury Goods industry, Nike generated $46.31 billion in revenue last year and maintains a 42.7% gross profit margin.

TD Cowen’s proprietary field research indicates gradually improving trends for Nike and Jordan products in both footwear and apparel categories, particularly Tech Fleece. The firm also noted declining brand momentum among competitors like New Balance, Adidas, Saucony, Skechers, and Asics.

The analyst projects Nike will return to sales growth in fiscal Q4 excluding foreign exchange effects, with growth accelerating to mid-single-digit percentages in fiscal year 2027.

TD Cowen forecasts Nike’s operating margin will recover to 9.3%, supporting an earnings per share estimate of $2.59, above the consensus estimate of $2.44.

In other recent news, Nike has been the subject of various analyst evaluations and market developments. Williams Trading has raised its price target for Nike to $100 while maintaining a Buy rating, anticipating positive changes in sales and margins within the next six weeks. Meanwhile, UBS has maintained a Neutral rating with a $63 price target, suggesting that Nike’s path to sustainable revenue growth and healthy operating margins may take longer than expected. Additionally, Bernstein has increased its price target for Nike to $90, citing potential upside from the Jordan brand, despite a decline in sales from 15% to 11% of Nike’s total sales from fiscal years 2024 to 2026.

In other developments, Deutsche Bank has raised its price target for JD Sports Fashion, noting potential benefits from a Nike comeback. This comes amid challenges in the athletic apparel market highlighted by lululemon athletica’s weaker-than-expected guidance, which has stirred concerns across the industry. Lululemon projected earnings per share and revenue below consensus expectations, impacting market sentiment. These recent developments reflect a dynamic environment for Nike and its competitors as they navigate market challenges and opportunities.

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