Nike’s Online Sales Fuel 2Q Beat; Shares Jump 5.6%

Shares of Nike rose 5.6% in Friday’s extended trading session after the athletic apparel giant reported better-than-expected 2Q results led by a surge in its digital sales.

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Nike’s (NKE) revenues of $11.2 billion surpassed analysts’ expectations of $10.6 billion and jumped 9% year-over-year. The outperformance was driven by strong digital sales growth of 84% and higher revenue growth across all geographies, especially Greater China. Nike’s direct sales grew by 32% in 2Q. Notably, the company’s revenue returned to a growth path in 2Q after posting declines in the previous two consecutive quarters.

Nike posted adjusted earnings increased 11.4% to $0.78 per share year-over-year, exceeding the Street’s estimates of $0.63 per share. The company said it saw improved sales and lower selling and administrative expenses, which were partially offset by a decline in gross margins.

Nike’s CFO Matt Friend said, “With healthy inventory positions across all geographies, our return to growth is a testament to our digital strength, as well as our disciplined marketplace and financial management.” (See NKE stock analysis on TipRanks)

Following the 2Q results, Guggenheim analyst Robert Drbul maintained a Buy rating and a price target of $165 (20.2% upside potential) on the stock. Drbul said that “Nike remains our Best Idea.” The analyst added, “Nike is the leader in an athletic (and broader active/athleisure) industry with favorable secular tailwinds. The brand commands dominant market share, which we expect will grow materially from here as digital scales further, new product innovation remains robust, and heavy investment behind key growth drivers continues, while some global peers operate more cost-consciously in an uncertain environment.”

Most of the Street shares Drbul’s bullish outlook on the stock. The Strong Buy analyst consensus is based on 26 Buys and 2 Holds. The average price target stands at $151.61 and implies upside potential of about 10.4% to current levels. Shares have advanced 35.5% on a year-to-date basis.