Nike(NYSE: NKE) is a stock for players who want to win convincingly on the market. That, at least, is the view of one analyst tracking the athletic wear and apparel giant. He recently reiterated his optimistic outlook on Nike's prospects, suggesting that the stock's price could accelerate 31% before long.
Ignore the China crisis
That Nike bull is Paul Jejuez of ever-influential Big Four bank Citigroup. He published a new note on Nike, in which he maintained both his buy recommendation and $102 per-share price target.
Jejuez was compelled to publish an update following developments with a crucial Nike business partner in China: wholesaler and retailer Topsports. That company warned investors that its operating profit for the six-month period ending Aug. 31 would likely be down by around 35% year over year. This is due to softening consumer demand in the country, which has seen relatively weak economic growth in the past few years.
While this is surely a concern to Nike, Jejuez does not feel the impact will be substantial. He wrote in his latest research update that "it is worth noting Nike's current fiscal 2024 guidance already implies a big step-down in sales in China."
A shift in strategy
It says something about Nike's operations that even a sharp and sudden tumble in a major international market shouldn't affect its business too badly. What's been more of a drag on the company and its stock was its attempts to effectively go it alone in retail, launching a sweeping direct-to-consumer (DTC) initiative that never really delivered.
To its credit, though, management has realized that wasn't the wisest approach and has retreated back to its more traditional model, reestablishing relationships with major retailers from the old days.
Nike, to my mind, is still being punished for this move and subsequent retrenchment. Meanwhile, health and fitness continue to be priorities for many consumers throughout the world, and Nike is a master at branding and keeping its products relevant. I feel it's something of an under-the-radar stock these days, and therefore surely worth considering as a buy.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.
