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Trends & Analysis
News

TJX announces strong sales, dividend hike

News

Who wins the S&P 500’s bank battle?

News

USD/JPY edges lower on economic data

News

Li Auto shares race ahead on upbeat earnings

News

Can anything stop NVIDIA?

News

Gold rises on soft dollar, geopolitical concerns

Asset Watch

Is lower inflation a boon for Nike?

Thursday, December 7, 2023

While higher input costs remained as Nike lost some of its pricing power, the recent inflation decline could help tilt the scale back in its favour. Goldman Sachs analyst Brooke Roach placed a $139 price target on the stock on Dec. 5 and said that margin expansion could headline 2024 as earning growth accelerates alongside inventory optimization. She added:
“Additionally, we see room for stronger revenue growth ahead as the company cycles tough compares and reaccelerates its innovation and marketing engine into 2024.”
So, with a less volatile inflation backdrop poised to provide more business clarity, the stock could shift from a 2023 laggard to a 2024 leader.
On the technical side, Nike ended the Dec. 5 session above its June 2023 highs and broke out above its declining resistance line (the downward-sloping white line). Likewise, it has surpassed its 200-day moving average, which is considered a barometer of long-term uptrends.

When you put it all together, Nike’s healthy technical combined with accelerating fundamentals offers relative value considering its meaningful underperformance of the S&P 500 in 2023.

 

Tepid sales in China have hampered the company’s top-line performance but Roach noted that direct-to-consumer (DTC) opportunities and favourable year-over-year (YoY) comparisons could make the region’s performance look much better in the months ahead.

 

So, has Nike entered a new bull market, or will recession fears weigh on the apparel giant when the calendar turns?


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