Goldman Sachs on Nike stock: do it
After getting pounded after a below-average quarter (at least by Nike standards), Goldman Sachs thinks Nike stock is a slam dunk.
Analyst Kate McShane came out on Tuesday with an early coverage on Nike (NKE) at Buy and a price target of $ 172.
McShane said his bullish call reflects: “i) a healthy industry environment with a continued focus on company-specific innovation to drive growth; ii) the possibility of extending its direct initiative to consumers which is expected to generate higher gross margins over time; iii) a high level of cash balance which should allow additional investments and a return on investment for shareholders; and (iv) our valuation indicates a rise in stock prices, particularly after the recent decline in supply issues, which we believe to be transitory and likely factored in. “
Nike stock rose nearly 2% to $ 151.68 in afternoon trading.
Stocks in the Dow component are up 7.6% year-to-date, compared to an 11% gain for the broader index. The stock fell 8% last month following Nike’s poor results on September 23.
The sneaker and clothing giant has seen a rare lack of quarterly sales, due to supply chain bottlenecks hampering the flow of goods. Nike executives have warned that supply chain issues will impact the rest of its fiscal year.
Nike has reduced its full-year sales outlook to an average single-digit percentage from an earlier outlook of low double-digit growth.
“We are not immune to headwinds in the global supply chain that challenge the manufacturing and movement of products around the world,” Nike CFO Matt Friend conceded to analysts in a statement. conference call.
McShane argues that now is the time to pull the trigger on Nike amid such depressed market sentiment on the stock.
“While the stock is currently trading at a slight premium over the market averaging over a period of 1, 2, 3 and 5 years. vs. S&P at + 16% year-to-date), we believe there may still be an increase in inventory as Nike will likely benefit from more wellness-focused customers, a probable increase in the precariousness of fashion trends after the pandemic, a continued execution of the company’s differentiated retail strategy which is expected to generate higher sales and margins, the exploitation of its rich customer data and its suite of applications to drive uptake and demand globally, and as supply / demand remains extremely tight; limit promotions, ”McShane explained.
Brian Sozzi is an editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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