Nike is poised for a comeback after a lousy 2022, according to Raymond James. Analyst Rick Patel initiated research coverage of Nike with an outperform rating, saying much of the bad news is priced into the sports apparel stock after its decline this year. The stock is down nearly 47% in 2022. “Aside from obvious macro headwinds, there are industry-specific challenges, and we expect a challenging 2H22. We also believe this is consensus view and while it’s impossible to call the trough in stocks, we believe investors should take a longer-term view,” Patel wrote in a Wednesday note. Global sports apparel brands such as Nike are dealing with growing macroeconomic pressures including rising inflation, a stronger dollar, excess inventory and supply chain issues, as well as Covid shutdowns in China. Still, Nike can come out of the other side of this period as a stronger company, according to the analyst. Patel said he expects strong revenue growth over the next two to three years, especially as demand for the Nike brand remains robust, and as the company shifts to a direct-to-consumer model. He also praised Nike’s strong balance sheet and free cash flow generation. “Our top picks in athletic brands have meaningfully asymmetric risk/returns that favor upside over the long-term, as these are high-quality companies that can navigate a difficult near-term without diminishing the potential to drive stronger growth beyond 2022,” Patel wrote. The analyst’s $99 price target on Nike is nearly 12% above where the stock closed Wednesday at $88.51. The stock is down 1.7% premarket Thursday after earlier rising 1.5%. Patel also initiated coverage of Lululemon with a strong buy rating, saying that the global brand could generate strong revenue growth as it expands its international footprint through 2026. —CNBC’s Michael Bloom contributed to this report.
© heardonwallstreet.com