Janney Capital Upgrades Nike (NKE) to Buy
Janney Capital upgraded Nike (NYSE: NKE) from Neutral to Buy with a price target of $93.00 (from $80.00), saying the model is inflecting on sustainable top line, accelerating margins.
Analyst Eric Tracy commented, "We typically don't like quarterly reactionary ratings changes, but sometimes you "just do it" because it is the right thing to do. We were admittedly overly cautious into the print on risk/reward (valuation vs. belief of limited EPS upside), but were proven wrong in 1Q. More importantly, our rationale for getting more constructive (even with post-qtr stock move) is based on: 1) a sustained, if not accelerating top line, 2) a multitude of levers that support more accretive growth and 3) strong FCF/productive capital allocation. We recognize these levers are somewhat subdued by strategic investments, demand creation, and FX; however believe an improving EPS algorithm (15-20% growth over a multi-yr period) warrants a re-rating of the multiple and getting more positive in our stance. With shares underperforming YTD (+3% S&P +9%), we recommend a rotation into shares of NKE given improved visibility to fundamentals. Our $93 FV (from $80) is based on shares trading at 22x our FY16 EPS (vs. 19-20x hist. avg.), or 1.3x PEG (vs. 1.5x hist. avg.)."
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Shares of Nike closed at $79.75 yesterday.