Nike Not Deterred by Supply Chain, Returns Robust Revenues

This past fiscal year has not been for the faint of heart, with valuations experiencing high volatility due to Fed policy changes, the new and spreading COVID-19 variant, and holiday shopping season well underway. One retailer that has repeatedly exceeded its Wall Street consensus estimates for earnings per share (EPS) reported its earnings this past week, and did not disappoint. Nike, Inc. (NKE) reported its earnings this week, and was subsequently rated bullishly by 11 out of 12 analysts yesterday.  

One of those optimistic on the athletic apparel, equipment, and sports services company is Sam Poser of Williams Trading. He encouragingly asserted that the “global health of the Nike brand has never been better,” and that despite unfavorable persisting supply chain disruptions, “factories in Vietnam have reopened and are operating at ~80% capacity.” This evinces an improving macro environment for Nike.  

Poser rated the stock a Buy, and added a price target of $196. This target currently reflects a potential 12-month upside of 17.63% from NKE’s closing price on Tuesday.

The five-star analyst went on to elaborate that because the company is doing well despite the supply impacts, he expects big moves once they dissipate. Poser anticipates Nike to accumulate more market share and produce more profit for both its near- and long-term outlooks.  

Thus far, Nike’s margins have been driven by strong direct to consumer sales, which has been facilitated by strategies using leveraged data and high levels of consumer engagement. Moreover, the firm’s management’s targets for 2025 are on track to be met as demand remains robust, and in-store sales and traffic are soon reaching pre-pandemic levels.  

While Poser stated that North American revenues and sales growth are healthy, he also cautioned about the lack of improvements made in China and Asia. By his calculations, these areas will start to begin to get sorted out by the second of 2022.  

Nike is well-positioned to remain a formidable foe to its peers, which include the likes of Adidas (ADDYY), Under Armour (UAA), Lululemon (LULU), among others. It is always useful to compare stocks before deciding on a long-term investment.  

Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.