Nike shares on tempo to hit file excessive as outlook tops expectations
Pedestrians walk past the American multinational sport clothing brand, Nike store and its logo seen in Hong Kong.
Budrul Chukrut | LightRocket | Getty Images
Nike shares closed Friday up more than 15%, hitting a record intraday high, after the sneaker maker forecast full-year sales topping $50 billion as its North American business rebounds from the lows of the coronavirus pandemic.
And in greater China sales appear to be improving, with Nike management saying the company is confident about its ability to regain trust with customers there, amid threats to boycott Western brands over their comments expressing concern about alleged forced labor in Xinjiang.
“These are times when strong brands can get stronger, and each quarter this reality becomes even more clear,” Nike Chief Executive Officer John Donahoe said during an earnings call Thursday evening.
Nike’s stock ended the day up 15.5% at $154.35. At one point, shares hit an all-time intraday high of $154.59. The retailer, which has a market cap of more than $243 billion, last saw its stock hit an all-time high of $147.95 on Dec. 21.
Globally, Nike is seeing shoppers splurge on new sneakers and fashion-forward sweatsuits to wear as more people begin to socialize again. The company’s Jordan brand has been a particular bright spot.
During the three-month period ended May 31, Nike’s total revenue nearly doubled to $12.34 billion from $6.31 billion a year earlier, topping Wall Street estimates by more than $1 billion. In North America, Nike’s biggest market, sales more than doubled to a record $5.38 billion.
Following Nike’s upbeat fiscal fourth-quarter results on Thursday afternoon, Cowen & Co. analyst John Kernan raised his price target to $181 from $145. Kernan said he sees a path for the company’s market cap to one day surpass $300 billion.
“Management’s confidence is hitting an inflection and Q4 results indicate the digitally driven acceleration in the financial model,” he said in a note to clients.
According to Telsey Advisory Group analyst Cristina Fernández, Nike is benefiting from its closer connections with customers through its membership program, higher full price selling, greater use of data and a smarter wholesale model with strong partners like Foot Locker.
Telsey raised its price target on Nike shares to $180 from $160.
“The strong momentum in Nike’s brand globally is more than offsetting pressure in China and supply chain constraints,” Fernandez said in a note to clients.
At least 12 brokerages have already raised their price targets on Nike shares, following the company’s fiscal fourth-quarter release. According to FactSet, the median target price of analysts who cover the company is now $176.90.
“The company is emerging from the Covid period into the biggest [profit and loss] evolutions in our coverage universe,” Credit Suisse analyst Michael Binetti said.
Nike warrants “a significant valuation premium” compared with other global apparel and footwear brands, he added.