Nike stock saw a rise on Monday as an analyst expressed confidence in the future of the renowned athletic clothing brand, particularly in regards to its performance in China.
Citi analyst Paul Lejuez upgraded Nike shares from Neutral to Buy and increased the price target on the stock to $135 from $110. The timing of this upgrade is significant, as the company is set to report its second-quarter financial results in just ten days.
In a research note, Lejuez commented, “While there are still challenges facing Nike’s top-line growth, we have a more optimistic outlook on the company’s ability to protect earnings per share in F24/F25 despite a volatile macro environment.” The analyst believes that lower freight costs, reduced promotions, and strong direct-to-consumer sales will have a positive impact on gross margins. Additionally, he is optimistic about Nike’s product lineup for the 2024 Paris Olympics and its position in the Chinese market.
Although it hasn’t been a smooth year for Nike, which experienced a 0.9% decline in shares amidst inventory issues and concerns about an economic slowdown in China, Lejuez remains hopeful. He revealed that Citi conducted a quarterly survey of 1,000 Chinese consumers and 1,600 North American consumers to evaluate the momentum of the Nike brand in these regions. The results showed promise.
Lejuez stated, “According to our China survey, consumers are feeling slightly more optimistic about their disposable income. In North America, our survey results suggest that consumers are also feeling slightly better about their disposable income compared to September, although inflation continues to be a burden on the consumer.”
On Monday, Nike shares rose by 2.5% to reach $118.85, while the S&P 500 saw a modest increase of 0.1%.