Shares of Nike (NKE) are on the rise after Canaccord analyst Camilo Lyon upgraded the stock to Buy as he believes the company has regained is footing and is marching back to form following two years of a soft product cycle, margin compression, and market share declines. Nike has been in the spotlight after announcing that former NFL quarterback Colin Kaepernick, who sparked controversy by kneeling during the national anthem to protest racial injustice, will be one of the faces of its ad campaign for the 30th anniversary of its “Just Do It” motto.
CANACCORD SAYS BUY NIKE: In a research note this morning, Canaccord’s Lyon upgraded Nike to Buy from Hold and raised his price target on the shares to $95 from $78. After two years of a soft product cycle that led to increased inventory levels, higher discounting, margin compression, and market share declines, Nike has regained its footing and is “solidly marching” back to top form, he argued. Further, the analyst noted that since last year’s announcement of its new “Triple Double” strategy, the company has most notably accelerated its product engine as evidenced by a flurry of new innovations and marquee collaborations. It also has increased its focus on the consumer experience via its SNKRS app, NikePlus membership, and other in store/online consumer-centric initiatives, he contended. Additionally, Lyon highlighted that speed initiatives via programs like Express Lane have also ramped up, and the steps taken thus far point to longer-term positive gross margin gains, particularly in light of what has been a decade of margin pressure from persistently rising production/labor costs, until last year when production costs were flat to margins. The analyst told investors that he believes the gross margin headwinds the company has faced over the past 2.5 years are set to reverse and sees newly introduced platforms coupled with forthcoming innovations sparking the next multi-year run for Nike.
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