UBS maintains Buy rating on Nike with $138 stock target

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On Tuesday, UBS has reaffirmed its Buy rating on Nike shares (NYSE:), maintaining a stock price target of $138.00. According to the firm’s analysis, Nike’s third-quarter performance is expected to align with current sell-side expectations, which are already factoring in modest results. The report suggests that Nike’s fundamentals for the quarter are not robust but should meet the consensus.

The market is currently not anticipating a significant shift in Nike’s sales growth trend based on the upcoming earnings report. UBS also does not foresee Nike altering its full-year 2024 guidance or providing preliminary insights into fiscal year 2025. As a result, changes to sell-side earnings per share (EPS) estimates are unlikely to occur following the report.

Regarding Nike’s stock performance, the options market is predicting a potential earnings-related price move of approximately +/- 6.9%, which exceeds the historical average movement of 5.7%. UBS concurs with this market sentiment, suggesting that expectations may be more optimistic than widely perceived.

UBS’s Quant Team has identified an increase in Nike’s crowding score, which has risen to 27.0, surpassing the five-year average of 19.2. This data indicates that despite Nike’s year-to-date underperformance compared to the , the stock is considered crowded with long positions. This reflects a belief among investors that Nike, as an exceptional company, is currently trading at a relative discount.

The firm’s outlook for Nike’s third-quarter earnings and sales is that they will likely be consistent with consensus estimates, with no significant deviations expected for the fourth-quarter guidance. This balanced perspective acknowledges both the potential for better-than-expected margins as an upside risk and the possibility of sales falling short as a downside risk.

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