Guggenheim analysts added Nike (NYSE:NKE) stock as their “best idea,” saying that its current price level represents “a compelling entry point” with an appealing risk/reward profile.
Nike shares opened 2% higher on Monday. Over the past three months, they lost almost 15% of their value.
Guggenheim reiterated a Buy rating and a target price of $130 on the stock.
“We see opportunity from our FY24 12.7% operating margin estimate, with contributions from gross margin expansion and SG&A expense leverage. We expect to see traction on Operating Margin expansion towards its high teen target in coming years,” analysts noted in a Monday note.
“For the stock to go materially higher, we need to see evidence of execution in the margin opportunity alongside of a re-acceleration of the top line in coming years,” they added.
Analysts believe that Nike is establishing a solid foundation for significant new product releases – with a focus on basketball, alongside running – that are poised to drive a surge in revenue growth in the second half of 2024 and into 2025.
The analysts also have an optimistic view of Nike’s Jordan brand, saying it represents a significant growth avenue for the company moving forward.
There's a particularly strong potential in the international market and among women's and children's segments, they specified.
“We believe the Jordan Brand is well on track to become the second largest brand in North America (up 35% CC in FY23),” they wrote.