Is Nike (NKE) Stock a Buy After Earnings Beat? 3 Analysts Weigh In.

Shares of Nike (NYSE:NKE) are in the green after the company reported its fiscal third-quarter earnings. For the quarter, revenue came in at $10.87 billion, beating analyst expectations of $10.59 billion and growing by 5% year-over-year (YOY). In addition, earnings per share (EPS) beat expectations of 71 cents as well, tallying in at 87 cents. However, in light of inflation and supply chain issues, the company declined to give guidance for the upcoming year. Instead, Nike will wait until it reports fiscal fourth-quarter results to provide guidance.

Nike (NKE) store in a shopping mall in Penang, Malaysia. robinhood stocks
Source: TY Lim / Shutterstock.com

NKE Stock: Nike Reports Earnings

Nike’s revenue was boosted by an uptick in North American demand, up 9% YOY. On the other hand, a Chinese boycott of Western products caused Nike’s revenue from China to fall by 5% YOY. The decline in Chinese revenue and supply chain issues factored into the company reporting a net income of $1.4 billion. This figure was down from $1.45 billion a year prior. However, gross margins increased to 46.6% from 45.6% the previous year. The improvement in gross margins was aided by “more full-price selling” and a shift to more direct-t0-consumer sales. During the quarter, wholesale revenue declined by 1%, while store sales increased by 14%.

Furthermore, Nike CFO Matt Friend explained that holiday sales would have been greater if the company had enough merchandise on hand to meet demand. Additionally, transportation times during the quarter “remained elevated.” Friend added that:

“Our third quarter results demonstrate NIKE’s ability to navigate through volatility, while continuing to serve consumers directly and digitally, at scale. Marketplace demand continues to significantly exceed available inventory supply, with a healthy pull market across our geographies.”

With Nike’s earnings results in mind, let’s take a look at how Wall Street views NKE stock.

3 Wall Street Analysts Weigh In on NKE Stock

  • Morgan Stanley has a price target of $192. Analyst Kimberly Greenberger reiterated her price target after reviewing fiscal Q3 results. Greenberger was impressed with Nike’s revenue beat and improved gross margins, despite “macro volatility and Covid related lockdowns in China.” The analyst also believes that Nike’s 2022 revenue guidance is conservative, but logical, given the “dynamic macro environment.”
  • Credit Suisse has a price target of $165. Analyst Michael Binetti raised his price target from $160 after reviewing Nike’s earnings. While China sales declined, the analyst believes that headwinds from boycotts and inventory shortages are improving. All in all, Binetti was impressed by “Nike’s ability to operate through what was most likely the toughest macro quarter since COVID started.”
  • Telsey has a price target of $165. Analyst Christina Fernandez lowered her price target from $19o prior to Nike’s earnings report. The analyst expected Nike to reiterate its fiscal year 2022 revenue guidance, which it did. In addition, Fernandez noted that Nike’s results would likely be hurt by a shortage in inventory, paired with Covid lockdowns in China.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


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