On Wednesday, Needham reaffirmed a Buy rating on shares of Foot Locker (NYSE: NYSE:FL), with a consistent price target of $25.00. Currently trading at $22.26, the stock has declined about 29% year-to-date. According to InvestingPro data, analyst targets for FL range from $16 to $30, reflecting mixed sentiment in the market.
The firm's focus is on the upcoming fiscal second quarter 2025 results from Nike (NYSE: NYSE:NKE), which are scheduled for release after market close on December 19, 2024. These results are anticipated to have significant implications for Foot Locker, which maintains a current ratio of 1.67, indicating strong short-term liquidity.
The analyst from Needham highlighted that while Nike might not have fully regained its brand momentum, its strategic choices are of greater consequence to Foot Locker. Notably, Nike's shift to re-emphasize its wholesale relationships, specifically with Foot Locker, is expected to be a positive topic during Nike's forthcoming earnings discussion.
The collaboration between Nike and Foot Locker has been strengthened, as Nike adjusts its strategy to balance direct-to-consumer (DTC) sales with wholesale operations. This pivot is seen as a beneficial move for Foot Locker, particularly as Nike undertakes efforts to streamline its market presence.
The Needham analyst believes that the strategic cleanup by Nike will have a favorable impact on Foot Locker, more so than on any other retailer, in the medium to long term. The anticipated improvement in product assortment and margin expansion positions Foot Locker as an attractive earnings per share (EPS) recovery narrative for the year 2025.
InvestingPro analysis shows analysts expect the company to return to profitability this year, with an EPS forecast of $1.24 for FY2025. For deeper insights into FL's recovery potential and access to 8 additional ProTips, consider exploring the comprehensive Pro Research Report available on InvestingPro.
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