Nike (NKE) Added to Analyst Focus List at JPMorgan; lululemon athletica (LULU) Removed from Focus List

(Updated - March 21, 2016 9:31 AM EDT)

JPMorgan maintained an Overweight rating on Nike (NYSE: NKE) and added the stock to its Analyst Focus List. Its price target was raised to $72 (from $67.50).

Analyst Matthew R. Boss said recent field work points to a near-term reality that is better than feared.

"Our recent field and channel work points to continued top-line strength in North America (multi region sporting goods channel work + mid-tier/KSS + offpricers) w/ inventory levels and markdown activity rational in our view," said Boss. "Investor fear is that inventory levels out of 3Q remain heavy (2Q CC & basis for 3Q’s 50bps of GPM contraction: “our inventory in North America will be somewhat elevated over the balance of the fiscal year, as we proactively manage the marketplace”) and the 100bps+ 4Q gross margin guide will be cut."

"We are modeling EPS of $0.49 in 3Q (revs +10% w/ GPM -35bps) and $0.52 in 4Q (revs up 7% w/ GPM +100bps) with market expectations for futures growth in the mid-to-high-teens (noting sequential 2 and 3-year stacks point to 20% CC)," added the analyst.

lululemon athletica (Nasdaq: LULU) was removed from JPMorgan's Analyst Focus List. Boss sees Q1 GPM and EPS that is below consensus.

"On 4Q, we’re modeling $0.80 (high-end of mgmt’s $0.78-$0.80 guide) based on +8.5% comps (1/11 ICR: + high-single-digits) and 216bps of gross margin contraction (49.3% vs. 49-50% guide). Looking ahead, we see a tough 1H16 setup with 1Q EPS likely set below the Street (JPM at $0.32 on 170bps of GPM contraction vs. Street at $0.37 w/ GPM down 60bps) setting up a materially 2nd half weighted guide, in our view (JPM modeling +4% 1H16 EPS growth vs. +31.2% growth in 2H16)," said the analyst.

lululemon athletica is rated overweight with a price target of $66.

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