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Nike is upgraded to buy Jefferies on fundamentals

Nike is upgraded to buy Jefferies on fundamentals
Business
Nike (NKE) slid less than the overall market Tuesday as Jefferies upgraded its rating on the sports apparel giant to buy from hold and lifted its share-price target to $192 from $140.

“We have grown increasingly confident in the medium-term growth and profitability trajectory of the business,” Jefferies analyst Randal Konik wrote in a commentary.

That view is based on a “favourable industry backdrop, ongoing success of the modern digitally-enabled customer-led strategy, and a shift to higher growth and margin channels and regions,” he said.

The stock traded at $135.67, down 0.54 per cent, compared to a 1.59 per cent drop for the S&P 500. Nike has soared 51 per cent in the past six months on strong earnings.

“Our new $192 price target represents about 40 per cent upside, as we anticipate a period of sustained earnings momentum,” Konik said. “The $192 target is predicated on 40 times fiscal year 2023 earnings.”

That’s “a peak multiple, but justified by the favourable sportswear market backdrop, … high barriers to entry with low probability of disruption and improved margin profile,” he said.

Last month, Citigroup analyst Paul Lejuez lowered his price target for Nike by $20 to $140 a share, and cut his rating to neutral from buy’, citing March boycotts of several foreign companies by Chinese consumers following comments about the country’s treatment of Uighur Muslims in Xinjiang.
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