Nike (NKE) Surges 13% After Beating Q4 Sales, Analysts Raise PTs After 'Exceptional' Quarter

Shares of Nike Inc. (NYSE: NKE) surged over 13% in pre-open trading Friday after the company reported better-than-expected Q4 earnings and sales, driven by record-breaking revenue in North America.

Nike reported earnings per share of 93 cents, up from analysts’ expectations of 51 cents. Revenue came in at $12.34 billion, compared to the estimated $11.01 billion. The footwear and apparel giant’s net income rose to $1.5 billion in the quarter ended May 31, compared to the loss of $790 million in the year-ago period.

“NIKE’s strong results this quarter and full fiscal year demonstrate NIKE’s unique competitive advantage and deep connection with consumers all over the world,” said John Donahoe, President & CEO.

“FY21 was a pivotal year for NIKE as we brought our Consumer Direct Acceleration strategy to life across the marketplace. Fueled by our momentum, we continue to invest in innovation and our digital leadership to set the foundation for NIKE’s long-term growth.”

In North America, Nike’s largest market, sales jumped to a new high of $5.38 billion, marking a 29% surge in sales in the region on a two-year basis. Sales in Greater China soared by 17% to $1.93 billion, while digital sales rose 41% compared to the year-ago period.

As for fiscal 2022, Nike estimated its revenue to rise by a low double-digit percentage, to more than $50 billion, compared to Wall Street estimates of $48.5 billion

At least 13 Wall Street analysts raised their price target on Nike following the results.

UBS analyst Jay Sole reiterated “Buy” and raised the price target to $185.00 per share from $170.00 per share after the sports retailer delivered an “exceptional” quarter.

“Nike's 42c 4Q21 EPS beat and well-above consensus FY22 guide demonstrated the company can still deliver big earnings growth despite near-term China challenges. The market's main question now is if this is "the top" for Nike? We think the answer is no. The financial benefits from Nike's transformation into a digitally-led, direct-to-consumer company are just starting to play out. We believe the reason to own Nike is for the exceptional growth it is likely to achieve over the coming years. We forecast a 16% 5-yr. EPS CAGR and believe this growth justifies a 34x P/E,” the analyst said in a note.

His new $185.00 price target is 40% above the current stock price as he sees limited downside for the stock going forward.

“We doubt the news out of China gets worse from here and this removes a main downside risk, in our view. Nike said, and UBS Evidence Lab's new China Online Market Monitor confirms, its China sales growth rate is showing gradual m/m improvement. Plus, with global athleisure demand remaining robust, Nike's innovation pipeline full, sporting events resuming, and inventory clean, we see more that can go right, from a sales and margin perspective, than wrong. Lastly, we note UBS Evidence Lab Transcriptlytics shows Nike management's tone improved to its best level in over a year,” Sole added.

BMO analyst Simeon Siegel also raised the price objective to $174.00 per share from $160.00 per share after “a broad-based beat.”

“Despite fears heading into 4Q, NKE posted a broad-based beat, with better revenues and meaningfully better margins, for the highest 4Q EBIT margin in years (maybenever?). Longer term, management introduced meaningfully higher LT targets: HSD-LDD average annual revenue growth, driven by Women’s, Apparel, Jordan, Digital & International (details below). Although DTC should drive higher GMs, we continue to note Wholesale actually carries higher EBIT rates of the two (industry-wide), a topic we have done deeper work on. We continue to believe NKE’s size/scale offers compelling LT competitive advantage,” Siegel wrote in a report on the Outperform-rated NKE.

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