Nike Inc, an American sportswear company headquartered in Beaverton, reported a surprise quarterly loss for the first time in more than two years in the last quarter of the fiscal year 2020 as lockdowns imposed worldwide to halt the spread of the deadly coronavirus have caused crippling damage.
The world’s leading designer, marketeer, and distributor of authentic athletic footwear, Nike’s fourth-quarter revenue plunged about 40% to $6.3 billion with a net loss in at 51 cents per share, declining from the prior year as the majority of NIKE-owned and partner stores in North America, EMEA and APLA were closed due to the COVID-19 pandemic, the company said in a statement.
However, digital sales increased 75% in the last quarter, with strong double-digit increases across all geographies and was approximately 30% of total revenue. For the fiscal year, Greater China revenues increased 8%, marking its sixth consecutive year of double-digit currency-neutral growth despite the headwinds from COVID-19 in the second half of the year.
The coronavirus outbreak has impacted businesses worldwide, leading nearly 50% fall in shipments to wholesale customers, resulting in lower total revenue and higher inventory. Gross margin plunged 820 basis points to 37.3% and net loss was $790 million.
“In a highly dynamic environment, the NIKE Brand continues to resonate strongly with consumers all over the world as our digital business accelerates in every market,” John Donahoe, president and chief executive officer at Nike said.
“We are uniquely positioned to grow, and now is the time to build on NIKE’s strengths and distinct capabilities. We are continuing to invest in our biggest opportunities, including a more connected digital marketplace, to extend our leadership and fuel long-term growth.”
Following this announcement, shares of the footwear maker dipped over 3% after closing 1.3% higher at 101.40 on Thursday.
Equity analyst comment
“Robust 4Q20 digital results and management’s commitment to an accelerated digital transformation leave us bullish on NIKE’s long-term prospects. NIKE continues to represent one of few companies likely to benefit in a post-COVID-19 world. Stay OW; estimates under review,” said Kimberly Greenberger, equity analyst at Morgan Stanley.
“Acceleration confirms the core tenets of our bull thesis, leaving us confident NIKE will be one of few companies to generate longer-term revenue and margin benefits post-COVID-19. In our view, the market understands the short-term COVID-19 impact on 2021e results, and investors will instead focus on NIKE’s longer-term opportunity in a post-COVID-19 world. We stay OW; estimates under review,” she added.
Nike outlook and price target
Twenty-two analysts forecast the average price in 12 months at $107.95 with a high of $130.00 and a low of $83.00. The average price target represents a 6.46% increase from the Thursday’s price of $101.40, according to Tipranks. From that 22, 18 analysts rated ‘Buy’, four rated ‘Hold’ and none rated ‘Sell’.
Morgan Stanley target price is $119. Nike had its price objective boosted by Credit Suisse to $111 from $114, UBS raised the target price to $122 from $114 and JP Morgan raised to $104 from $91. Jefferies raised it to $95 from $83, Needham raised to $113 from $80, BTIG raised target price to $117 from $108.
However, Cowen and Company cut the target price to $107 from $110. It is good to buy at the current level as 50-day Moving Average and 50-200-day MACD Oscillator signals a strong buying opportunity.
This article was originally posted on FX Empire
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