CFRA upgrades Nike shares to “buy” as stock rises By Investing.com

On Friday, CFRA increased its rating for shares of Nike (NYSE: NYSE:) shares from Hold to Buy and set a price target of $89.00, citing rising value in the apparel and footwear giant’s stock despite a forecast sales decline and increased competition.

Nike’s price target is based on 25.5 times the company’s forecast earnings per share (EPS) for the fiscal year ending March 2025 (FY25), which is below the company’s two-year average price-to-earnings (P/E) ratio of 28.8.

The analyst’s view reflects the belief that Nike’s stock multiple has been inflated in recent years and should move closer to its pre-pandemic levels in the mid-20s. Nike, known for its strong brand in the global footwear and apparel market, is expected to weather the first half of the year’s revenue decline and still post earnings per share of $3.50 in FY25.

Nike’s recent fourth-quarter earnings call indicated a significant decline in sales and the company is facing new competition from brands like Hoka and On. Nevertheless, CFRA sees this as an opportunity for investors as Nike’s stock becomes more attractive as the company focuses on innovation and operational efficiency. The company expects Nike’s sales to decline in the low single digits over the next 12 months, but expects slightly higher margins.

The upgrade to “Buy” reflects confidence in Nike’s continued market leadership and solid financial position. CFRA cites Nike’s “strong balance sheet” and ability to return significant capital as additional strengths. This financial stability, combined with the company’s commitment to innovation and efficiency, underpins the positive outlook for Nike’s stock performance.

In other recent news, sportswear giant Nike has been at the center of several significant developments. Following a surprise drop in sales, the company plans to launch a new line of low-cost sneakers priced at $100 or less to appeal to price-conscious consumers worldwide. The move comes against the backdrop of a challenging macroeconomic environment and increased competition in the sportswear sector.

In the wake of these developments, Deutsche Bank has cut its price target for Nike from $115 to $92, but maintained a “buy” rating. In light of Nike’s fourth-quarter results and a stronger-than-expected revenue forecast revision for fiscal 2025, the bank has also adjusted its earnings per share forecasts for fiscal 2025 and 2026, cutting them by about 23%.

At the same time, French authorities stepped up their efforts to combat counterfeit products and carried out extensive raids in which around 63,000 counterfeit items were seized, including counterfeit Nike products.

This move is part of a broader crackdown by the French government on counterfeiting. The organizers of the 2024 Paris Olympic Games and the International Olympic Committee have joined forces with UNIFAB, a French intellectual property protection association, to combat counterfeiting.

These are the latest developments at Nike as the company continues to navigate a difficult market environment and strives to adapt and respond with innovation.

InvestingPro Insights

With CFRA raising its rating on Nike (NYSE:NKE) to Buy, it’s worth considering additional insights from InvestingPro. Nike has demonstrated a strong commitment to shareholder returns, increasing its dividend for an impressive 22 consecutive years, which is consistent with CFRA’s view of Nike’s robust financial position. In addition, the company’s resilience is underscored by its status as a major player in the textile, apparel and luxury goods industry despite recent challenges.

InvestingPro’s data shows a market capitalization of $110.95 billion at a P/E ratio of 19.66, slightly higher than the trailing twelve-month P/E ratio of 18.5 as of Q4 2023. The PEG ratio for the same period is 1.26, suggesting a balance between the stock price and expected earnings growth. In addition, Nike’s solid financials are underlined by a trailing twelve-month gross profit margin of 44.56%, which shows the company’s efficiency in generating revenue relative to costs.

For investors looking to dig deeper, InvestingPro offers additional tips, including insights into Nike’s trading patterns and future earnings forecasts. With the stock currently trading near its 52-week low and analysts revising earnings downward for the coming period, potential investors should carefully consider these factors.

For those who want to know more, use the coupon code PRONEWS24 to receive up to 10% off a Pro annual subscription and a Pro+ annual or two-year subscription, which includes numerous additional InvestingPro tips to support your investment decisions.

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