It’s the right time to “aggressively” buy shares of beaten-down sportswear brand Nike (NKE) on signs its turnaround plan is working. That is the view of Jefferies analyst Randal Konik, who upgraded the stock to a Buy and raised the price target on signs of a V-shaped recovery in sales.
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Analyst Likes new CEO’s Plans
New CEO Elliott Hill’s plan to restore wholesale partnerships and push for new products will improve profitability and increase its share of the athletic footwear market, the analyst said. Nike veteran Hill took over from previous CEO John Donahoe in October after a persistently weak stock price and slacker sales.
There were signs in the latest quarterly earnings update that the new boss was making progress, as revenues beat expectations. Only Nike’s fifth-ever CEO, Hill kicked off the earnings call by declaring the firm had “lost” its “obsession with sport.”
“We will lead with sport and put the athlete at the center of every decision,” he said.
Konik is buying into the turnaround, it seems, declaring it was his “new top pick” and setting a price target of $115, about 50% above Friday’s closing price. He says the low valuation and strong sales outlook offers a compelling opportunity for investors as Hill has the right playbook for success.
The company’s new CEO is tackling product and distribution issues “head-on, positioning the brand to again outgrow the market and take back lost share,” the analyst told investors in a research note.
Not everyone is impressed with Hill and the turnaround, though, as Citi recently downgraded Nike to Neutral from Buy with a price target of $72, down from $102, after attending an event to meet with Hill. Analyst Paul Lejeuz said Nike’s turnaround timing was “much less visible,” and he no longer has “the patience or conviction to wait another year.”
Konik at Jefferies also notes however that Nike’s brand remains strong and it should rebound from self-inflicted problems amid a less competitive market. As such, the analyst expects a “V-shaped” earnings and margin recovery in fiscal 2027 for Nike.
Is NKE a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating based on 15 Buys and 13 Holds. The average NKE price target of $86.52 implies around 13% upside.
