On Wednesday, Telsey Advisory Group adjusted its price target on shares of Nike (NYSE:NKE), reducing it to $96 from the previous $100, while continuing to endorse the stock with an Outperform rating. The revision follows the announcement made last week regarding the appointment of Elliott Hill, a seasoned executive at Nike, as the incoming CEO, effective October 14.
The research firm anticipates that Hill's leadership will mark the onset of a potential revival for Nike, projecting this shift to start taking shape in the fiscal year 2026. Analysts at Telsey expect that Hill's initial strategies will be shared during the second-quarter fiscal 2025 earnings call scheduled for late December, which could bolster investor confidence in the company's trajectory.
Nike has recently seen success with its latest running products, which have contributed to the segment's growth in the first quarter of fiscal 2025. Telsey highlighted that this positive reception, along with the promise of further innovation across the product line in upcoming quarters, supports their continued Outperform rating for the sportswear giant.
Despite the positive outlook, Telsey has adjusted its 12-month price target to $96, applying a price-to-earnings (P/E) multiple of approximately 30 times to its reduced fiscal year 2026 earnings per share (EPS) estimate of $3.20, which is a decrease from the earlier $3.60 estimate. This P/E ratio is in alignment with the company's current trading multiples based on fiscal year 2025 EPS estimates.
In other recent news, Nike Inc (NYSE:NKE). has been the subject of several analyst adjustments following its first-quarter results for fiscal year 2025. RBC Capital lowered Nike's price target to $82, citing a slower-than-anticipated product pivot and a downward guidance for the second quarter. Similarly, JPMorgan (NYSE:JPM) revised Nike's price target down to $77, following the company's projections of an 8-10% decrease in second-quarter sales. TD Cowen, on the other hand, raised its price target for Nike to $78, maintaining a Hold rating on the stock.
Nike's first-quarter results showed a 10% revenue decline, but earnings before interest and taxes (EBIT) and earnings per share (EPS) outperformed market expectations. Amidst these changes, the company withdrew its full-year guidance, allowing incoming CEO Elliott Hill to reassess the company's strategy. Nike's management projected an 8-10% decrease in second-quarter sales and a 150 basis point decrease in gross margin.
These recent developments have led to a cautious approach by analysts due to uncertainties surrounding Nike's short-term performance and strategic realignment. Despite the challenges, Nike remains optimistic about long-term opportunities, particularly in China. The incoming CEO is expected to play a critical role in steering the company's strategy moving forward.
InvestingPro Insights
To complement Telsey Advisory Group's analysis, InvestingPro data offers additional insights into Nike's financial health and market position. Nike's P/E ratio stands at 23.74, which is lower than the 30 times P/E multiple applied by Telsey for their price target calculation. This suggests that the stock might be trading at a more attractive valuation than analysts' future projections.
InvestingPro Tips highlight Nike's strong dividend history, having raised its dividend for 22 consecutive years and maintained payments for 41 years. This demonstrates the company's commitment to shareholder returns, which could be appealing to long-term investors despite the recent price target reduction.
The company's revenue for the last twelve months as of Q4 2024 was $51.36 billion, with a gross profit margin of 44.68%. These figures underscore Nike's substantial market presence and profitability, aligning with Telsey's optimistic view on the company's potential for revival under new leadership.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on Nike, providing a deeper understanding of the company's financial position and market dynamics.
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