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Nike is crushing competitors and Wall Street is obsessed again with the stock

Brian Sozzi
·Editor-at-Large
·6 mins read

While Under Armour (UA) navigates perpetual restructuring mode and Adidas monitors the unknown that is the Twitter feed of brand spokesperson Kanye West, good ole’ Nike (NKE) appears to be running back at a high speed financially.

And Wall Street is loving new Nike CEO John Donahoe for it.

Shares of Nike exploded 13% to $131 in pre-market trading Wednesday following much better than expected fiscal first quarter earnings. At its current indication, Nike’s stock will open at a record price. That’s no small feat considering scores of department stores Nike sells to continue to see sparse traffic, consumers globally remain cautious and the company is working through excess inventory caused by a demand slowdown at the start of the COVID-19 pandemic.

Quick Nike quarterly highlights:

  • Earnings smashed through Wall Street estimates by 48 cents.

  • Sales beat estimates by about $1.4 billion.

  • Nike digital sales popped 82%.

  • Triple-digit growth in monthly active users for Nike’s e-commerce app.

If there is anything that sums up Nike’s quarter and the market’s loving reaction, it’s a return to a form of greatness in what is a new world for retail. Donahoe and his CFO Matt Friend captured it perfectly on the earnings call, making frequent reference of “market share gains” and “accelerating” market share.

CORTE MADERA, CALIFORNIA - SEPTEMBER 22: Nike shoes are displayed at a Macy's store on September 22, 2020 in Corte Madera, California. Nike reported better-than-expected first quarter earnings with net income of $1.52 billion, or 95 cents per share, compared to $1.37 billion, or 86 cents per share, one year ago. (Photo by Justin Sullivan/Getty Images)
CORTE MADERA, CALIFORNIA - SEPTEMBER 22: Nike shoes are displayed at a Macy's store on September 22, 2020 in Corte Madera, California. Nike reported better-than-expected first quarter earnings with net income of $1.52 billion, or 95 cents per share, compared to $1.37 billion, or 86 cents per share, one year ago. (Photo by Justin Sullivan/Getty Images)

“In challenging times, we know how to drive meaningful connections with our consumers. You can see this in our market share gains across the NIKE and Jordan brands,” Donahoe told analysts. In essence, that’s a byproduct of Nike getting its innovation edge back (see the widely acclaimed launch of the Next running platform), Donahoe pivoting quickly in his tenure to online only offerings and app improvements and the company improving the quality of its apparel (notably in women’s).

Put all that together, that’s why you have Wall Street analysts going ga-ga (as seen in bullish ratings, price targets and profit estimates) for Nike again. Even analysts with Hold ratings on Nike sound upbeat following the quarter.

Here are what several top Nike analysts Yahoo Finance follows are saying right now.

Simeon Siegel, BMO Capital Markets

  • Rating: Outperform (reiteration)

  • Price Target: $134

“NKE’s 1Q beat continues to showcase how the company’s size and scale offers a structural long-term competitive advantage deploying its moat-digging budget across R&D and marketing to go deeper into customers’ wallets, stretching its competitive set from athletic peers, to anyone that sells footwear & apparel, all while improving its direct and wholesale distribution. Clearly the shares are expensive, but they are expensive for a reason, and we expect them to continue compounding.”

Robert Drbul, Guggenheim

  • Rating: Buy (reiteration)

  • Price Target: $165

“Under the leadership of CEO John Donahoe, Nike is rapidly embarking on the next era of its company history; this will be digitally-led and likely defined by even greater separation vs. industry peers as well as from Nike's own historical rates of productivity, consumer engagement, and financial performance. Overall, our investment thesis on NKE was further reinforced by the results and strategy put forth by Nike last night.”

Randal Konik, Jefferies

  • Rating: Hold (reiteration)

  • Price Target: $117

“We like the NIKE brand long term, and expect that it will benefit from health/wellness becoming of even greater focus among consumers. We believe that shares should have a positive bias, but valuation multiples look full, so we maintain our Hold rating and raise our price target.”

Mitch Kummetz, Pivotal Research Group

  • Rating: Buy

  • Price Target: $140

“NKE reported a substantial 1Q sales, EBIT and EPS beat. Last quarter, the company missed consensus sales by $1B, and this quarter, sales came in $1.4B ahead of expectations. We were not entirely surprised by the strong 1Q performance, hence our Street-high estimates. NKE attributed the 1Q upside to better-than-expected demand, supply and fulfillment. We weren’t too surprised by the robust demand, as our checks continue to show that NKE is taking market share across its brand portfolio. But we didn’t anticipate such strong execution. The company is also now substantially raising its sales outlook for the year. This reflects the 1Q upside as well as a more favorable outlook for the balance of FY21. In short, NKE’s 1Q outperformance gives the company more confidence in being able to deliver in an uncertain environment.”

Paul Trussell, Deutsche Bank

  • Rating: Buy (upgrade from hold)

  • Price Target: $151

“NKE is a best-in-class consumer brand with 1) an innovative product pipeline in running, basketball, yoga, and sportswear for men & women; 2) robust digital and strong overall direct sales growth that are lifting the margin profile as it becomes a bigger part of the mix; and 3) market share gains across all geographies while also benefiting from an expanding pie through increased consumer focus on health, exercise, sports, and dressing casually. While none of these three points are new to the story, we underappreciated the acceleration that these drivers would experience through the pandemic. In addition, near-term concerns regarding elevated inventory levels in the channel and reduced orders from wholesale partners have not played out. As impressive 1Q results showed, NKE is a better, more profitable company today than it was a year ago and there is quite a short list of entities that have been able to achieve that.”

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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