Nike's Stock Upgraded to Buy by Argus, Target Price Raised to $85

Investment bank Argus has raised its target price for Nike (NKE.US) to $85, citing the company's strong long-term prospects despite facing intense competition and rising costs due to its reliance on overseas manufacturing. Analyst John Staszak noted that Nike's recovery is underway, and the firm has upgraded its stock rating from "hold" to "buy."

Argus believes that Nike, the world's largest sportswear company, will continue to dominate the market through its robust marketing strategies and high-profile endorsements. The firm's optimism is underpinned by Nike's ability to navigate through competitive pressures and cost challenges, leveraging its brand strength and innovative product offerings to maintain its market leadership.

The upgrade in Nike's stock rating reflects Argus' confidence in the company's strategic initiatives and its potential for sustained growth. Despite the headwinds, Nike's commitment to innovation and its strong brand equity position it well to capitalize on opportunities in the global sportswear market. The firm's focus on digital transformation and direct-to-consumer sales channels further enhances its competitive edge, ensuring that it remains a formidable player in the industry.

John Staszak highlighted that Nike's long-term growth is expected to be driven by several key factors, including brand endorsements, a focus on women's products, continuous product innovation, the expansion of e-commerce sales, and a recovery in the China market. These elements are crucial for Nike's sustained success and market dominance.

In its recent fourth-quarter financial report, Nike reported revenue of $11.1 billion, a 12% year-over-year decline, but still exceeding market expectations of $10.72 billion. Adjusted earnings per share fell 86% to $0.14, slightly beating estimates. While sales in North America, Greater China, and Europe, the Middle East, and Africa regions all declined by double digits, the actual declines were within the expected range. Nike indicated that the downward trend in annual sales is beginning to ease, suggesting that CEO John Donahoe's strategic measures are yielding results.

Despite these positive signs, John Staszak has lowered his earnings per share estimates for Nike's fiscal years 2026 and 2027 due to rising costs related to tariffs. The estimates for 2026 have been reduced from $3.00 to $1.80, and for 2027 from $3.80 to $2.80. This adjustment reflects the ongoing challenges Nike faces in managing its supply chain and cost structure.

Most analysts share Argus' optimistic view of Nike's recovery. They believe that Nike's "Win Now" strategy will deliver positive results in the medium term. Despite significant cost challenges in reducing production in China, Nike's brand strength and innovation remain key drivers of revenue growth. Initiatives such as returning to the Amazon platform, launching new products like "snoafer," and collaborating with SKIMS are expected to bolster Nike's market position. Additionally, patient investors are likely to benefit from Nike's strong balance sheet and steady dividend growth, as the company's current progress lays a solid foundation for long-term growth.