TD Cowen has adjusted its price target for Nike Inc (NYSE: NYSE:NKE), increasing it to $78.00 from the previous $71.00. Despite this change, the firm maintained its Hold rating on the shares of the athletic apparel and footwear giant.
The revision comes in the wake of a recent update to the company's financial outlook.
Nike's forecast for fiscal year 2025 (FY25) and fiscal year 2026 (FY26) earnings per share (EPS) was revised, with an 11% reduction for FY25 and a 5% decrease for FY26. The cutback is attributed to a more conservative outlook for FY25. In response to these adjustments, TD Cowen has revised its target multiple to better reflect the market's reaction to the new CEO's appointment, which has been viewed positively.
The new price target of $78 is based on a 25x multiple of TD Cowen's estimated FY26 EPS for Nike, which stands at $3.18. This estimate falls below the consensus EPS forecast of $3.50. The firm's valuation reflects caution regarding the competitive landscape Nike operates in, with intense rivalry in both the footwear and apparel sectors expected to contribute to an extended period of recovery for the company.
The analyst from TD Cowen noted, "We reiterate our Hold rating following tonight's 11% cut to FY25 and 5% cut to FY26 EPS estimates following a reduced FY25 outlook. We're taking our target multiple higher to reflect the improved sentiment regarding the CEO change. Competition in both footwear and apparel is likely to lead to a prolonged turnaround. Target (NYSE:TGT) moves to $78, 25x our FY26E EPS of $3.18, below consensus of $3.50."
Nike reported a decrease in first-quarter 2025 sales, though earnings before interest and taxes (EBIT) and earnings per share (EPS) exceeded market expectations. Despite these mixed results, Nike experienced a downturn in sales across most regions and product categories. The company also withdrew its financial guidance for fiscal year 2025, indicating a less optimistic sales outlook for the second half of the year.
Nike's management projected an 8-10% drop in second-quarter sales, a 150 basis point decrease in gross margin, and unchanged selling, general, and administrative expenses. Analysts from Seaport Global Securities maintained a Neutral rating on Nike, while JPMorgan (NYSE:JPM) revised Nike's price target down to $77 from $80.
InvestingPro Insights
While TD Cowen has adjusted its price target for Nike Inc (NYSE:NKE), recent data from InvestingPro provides additional context to the company's financial position and market performance. Despite the cautious outlook noted in the article, Nike's stock has shown a strong return of 17.74% over the last three months, indicating positive short-term momentum.
InvestingPro Tips highlight that Nike has maintained dividend payments for 41 consecutive years and has raised its dividend for 22 consecutive years. This consistent dividend history suggests financial stability, which could be reassuring for investors amidst the competitive challenges mentioned in the analyst's report.
However, it's worth noting that Nike is trading at a high Price / Book multiple of 9.26, which aligns with TD Cowen's cautious stance on valuation. The company's P/E ratio of 23.74 also suggests a premium valuation, which investors should consider in light of the revised earnings outlook discussed in the article.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips that could provide further insights into Nike's financial health and market position.
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