Nike stock rose Monday after Citi upgraded the Dow Jones athletic apparel giant and hoisted its price target based on margin recovery expectations.
Citi analyst Paul Lejuez upgraded Nike to buy from neutral early Monday and hoisted its price target to 135 from 100. Lejuez was upbeat about Nike's ability to protect earnings in the 2024 and 2025 fiscal years, despite forecasts for a choppy macroeconomic environment.
Citi expects gross-margin recovery beginning in Q2 2024 through 2025, driven by leaner inventory, lower promotional activity and direct-to-consumer benefits. Meanwhile, Nike has a new innovation calendar set to roll out in 2024 ahead of the Paris Olympics as well as a solid position in China. Citi sees a favorable risk-reward opportunity at the shares' current levels.
The Dow Jones retailer expects Q2 2024 gross margins to expand by about 100 basis points vs. the prior year due to strategic pricing, improve markdowns and lower ocean freight rates, Nike reported in its late September Q1 2024 earnings beat.
Meanwhile, Nike is set to announce second-quarter results late Thursday, Dec. 21. FactSet forecasts Nike to report a 2.4% earnings decline to 83 cents per share on 0.6% revenue growth to $13.39 billion.
Nike Stock
Nike stock has been consolidating since May, but has rebounded nearly 70% from its September low.
A decisive move on Dec. 1 showed Nike clearly in control of support above its 200-day line. Aggressive investors could have used the Nov. 29 high of 112.15 as an early entry. Nike shares are 13% below a standard buy point shown by MarketSmith at 131.31.
Nike stock climbed 2.3% Monday. Shares are up about 1.4% in 2023 through Monday's close.
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