Citi Upgrades Nike (NKE) to Buy, 'An Attractive Margin Recovery Story in a Choppy Macro'

Citi analyst Paul Lejuez upgraded Nike (NYSE: NKE) from Neutral to Buy with a price target of $135.00 (from $100.00).

The analyst comments "We are upgrading NKE from Neutral to Buy and raising our TP from $100 to $135. Top-line challenges remain, but we are more optimistic about NKE’s ability to protect EPS in F24/F25 despite a choppy macro, driven by its: (1) GM recovery starting in 2Q24 thru F25 from freight (est ~300bps), leaner inventory/lower promos, and DTC mix benefit (that has been temporarily hidden); (2) New innovation in calendar 2024 ahead of Paris Olympics; and (3) Solid position in China despite the volatile macro. We expect a 2Q24 rev miss (-1% vs cons +1%) but a GM beat (+140bps vs cons +100bps). Mgmt is likely to take a more conservative view on 2H24 sales (which the mkt anticipates) but also communicate an ability to hit EPS targets with more visible GM gains coming and better SG&A mgmt. A one-of-a-kind brand with visible margin recovery creates a favorable risk/reward in our view."

For an analyst ratings summary and ratings history on Nike click here. For more ratings news on Nike click here.

Shares of Nike closed at $115.91 yesterday.

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