Nike remains ‘fairly elevated’ – RBC Capital

By Sam Boughedda

Nike ‘s (NYSE:) price target was raised to $120 from $115 by RBC Capital analysts in a research memo Wednesday previewing the company’s fiscal second quarter.

The analysts, who maintained an Outperform rating on the stock, said investor skepticism remains “fairly elevated” for sporting goods and Nike ahead of 2Q23E earnings on December 20.

However, they added that if Nike can deliver low double-digit revenue growth with no change to FY23E guidance, and no major surprises for China, despite COVID headwinds, then sentiment on Nike could further improve.

“We forecast 2Q23E group revenues of $12.67bn (+12% reported, +17% cFX), gross margin of 42.1% (-380bps yoy), EBIT of $1.27bn (10.1% margin) and diluted EPS of $0.64,” the analysts wrote.

“We expect higher markdown stance in N America and to a lesser extent EMEA to support revenue growth (both +18% cFX) which are stable on 2yr stacks. We observe market leading online brand heat metrics for both website traffic and social media momentum for Nike relative to peers, despite outsized absolute levels (traffic volume and follower count),” they added.

They also noted that points to watch out for include signs of improvement in China trends, progress on excess inventory liquidation, insight into new product introductions for lifestyle and performance footwear for 2023, and FY23E guidance changes.

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