🤯 Have you seen our AI stock pickers’ 2024 results? 84.62%! Grab November’s list now.Pick Stocks with AI

Truist upgrades Nike stock to Buy, says new management can reignite interest

Published 10/10/2024, 10:26 PM
© Reuters.
AMZN
-
M
-
NKE
-
DBI
-

Investing.com -- Analysts at Truist Securities have upgraded Nike (NYSE:NKE) stock to Buy, a move driven by optimism around recent leadership changes.

The price target has also been raised to $97 from $83, reflecting more than 17% upside from Nike’s current trading price.

While acknowledging that Nike's turnaround may be a long and uncertain process, Truist analysts believe the new management, including the return of long-time veterans like Tom Peddie and incoming CEO Elliot Hill, can reignite excitement around the brand.

A key factor in this upgrade is the management's focus on restoring Nike’s wholesale relationships, which had been neglected during its direct-to-consumer (DTC) expansion.

Truist believes that re-engaging with retail partners like Macy’s Inc (NYSE:M) and Designer Brands Inc (NYSE:DBI), and potentially establishing a store on Amazon (NASDAQ:AMZN), could drive significant growth.

“With Elliot Hill and Tom Peddie at the helm, we believe Nike’s first strategic priorities will revolve around re-engaging with retail partners,” Truist analysts wrote.

The re-entry into Amazon’s platform, especially after recent improvements in Amazon’s counterfeit prevention, is seen as a potential “game-changer.”

While the financial recovery may take time, Truist remains positive about near-term catalysts, such as Nike’s investment in marketing and endorsement deals. The signing of WNBA star Caitlin Clark to a multi-million dollar contract is highlighted as an underutilized asset.

“Although a fundamental recovery remains a long-term prospect, we think some near-term wins from the fresh team should be enough to show investors there are better times ahead,” analysts noted.

In terms of valuation, Truist says that while Nike shares aren’t “cheap,” the stock’s underperformance over the past year has created an attractive entry point for investors betting on a long-term recovery.

Following three consecutive earnings and guidance disappointments, Nike shares fell more than 30% since December 2023, compared to a 22% gain for the S&P 500 over that period.

“While shares are currently trading at ~28.5x Street’s next-twelve-months EPS forecasts on a relative basis, NKE’s current ~32% premium to the S&P 500 is well below the 3-year average of ~60%,” analysts said.

“At these levels we think qualitative improvements that highlight that the new management team is aggressively pursuing a turnaround would be enough for shares to outperform.”

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.