Morgan Stanley analyst Jay Sole believes Nike sales will rise in the coming months due to hot new sneaker offerings. As a result, he raised his rating for Nike to overweight from equal-weight.
“We think the window to buy Nike at the bottom of a cycle is closing. Nike EPS and North America sales growth rates are likely troughing,” Sole wrote in the report Wednesday. “We believe new Nike products like Air VaporMax, fashion shifts, and Nike’s improving-more-rapidly-than-expected speed-to-market capabilities reverse headwinds experienced over the last 18 months.”
Nike underperformed the market in the previous 12 months with its shares flat through Wednesday compared to the s 14 percent return.
The analyst raised his price target for Nike to $68 from $56, representing 18 percent upside from Wednesday’s close.
Sole predicts the Air VaporMax, which the company launched March, will become Nike’s next $1 billion in sales shoe after his conversations with industry sources and retailers. As a result, he estimates the firm’s North American year-over-year sales growth will rise to 5 percent next quarter from his forecast of negative 2 percent in the current quarter.
“As Nike proves it can deliver winning product innovations and navigate the online transition, we think market fears subside and the stock’s P/E [price to earnings multiple] expands,” he wrote.