Raymond James analyst Rick B. Patel initiated coverage on Nike Inc NKE with an Outperform rating on the shares and a price target of $99.
The analyst said Nike’s revenue should grow by more than $7 billion from pre-COVID to the end of FY23, but operating profit will rise below $100 million due to margin headwinds that are transitory.
Patel added that Nike shares are down 47% year-to-date because of the negative impact of elevated inventories, China weakness from COVID policy, and general concerns about consumer behavior.
After the guide-down in Q1 FY23, the analyst believes much of the bad news is priced in to the stock.
He views Nike’s underlying demand and brand strength as strong. He sees NKE in the middle of a multi-year journey to transform into a direct-to-consumer (DTC) model.
Patel said the transformation, led by Digital, will create strong tailwinds for revenue and margin growth.
Price Action: NKE shares are trading lower by 0.08% at $88.44 on the last check Thursday.
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