Nike Stock is Shining On Improving Fundamentals

Nike stock price rebounded sharply after experiencing a sharp sell-off early this year amid coronavirus related lockdowns and a sharp drop in sporting goods demand. Nike stock price has recovered all the losses and the shares are currently in the positive territory.

Nike’s strategy of restructuring its business also helped in soothing investor’s sentiments. The company has recently announced massive job cuts and reorganization of the managerial team to improve the business performance in testing times. Its total global workforce stands around 77K.

The CEO Jeff Macke said: “Nike is doing direct-to-consumer on the fly during The Virus … Plans to cut the number of stores allowed to carry the brand, taking more control of the experience (and customer information) … Smart.”

In addition, the market data suggest that Nike has been experiencing sharp growth in demand over the last two months.

Bank of America data shows high double-digit growth in web traffic and app downloads during the month of June and July. The Bank has provided a price target of $100.

NKE NIKE, Inc. daily Stock Chart

BofA said:

“Our $110 price objective is based on 36-37x our F2022 EPS estimate of $3.00, above the high end of Nike’s historical P/E range of 15-30x over the last five years as we believe Nike should continue to gain share within the global casual apparel & footwear markets globally.”

The second-quarter revenue and earnings miss hasn’t dented Nike stock price rally as investors look towards second-half performance.

Its revenue from the North American business plunged 46% year over year during the second quarter. On the positive side, digital sales grew 75% year over year in the second quarter.

Nike says that its fundamentals are steadily improving and they have opened 90% of stores. The company expects to generate a strong improvement in third-quarter revenue and earnings.

Editor TTD


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