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Cowen analyst John Kernan trimmed the price target on Nike (NYSE:NKE) shares to $133 per share from $139 but told investors in a research note that macro worries create a buying opportunity on valuation.
“Our digital checks for Nike indicate the brand has held up vs. peers, with Google Search trends up +2% y/y on a 13-week avg. basis vs +9% in Q4:21. We note an easing in search through Nike’s Q4 with May 2022 down -1% y/y vs. April up +1% and March up +8%. Similarweb data indicates Nike.com unique visitors were up +4% on avg. on a T3M basis y/y (Mar-May 2022) as it lapped +21% in its fiscal Q4 period last year,” said Kernan.
The analyst added that unique visitor growth increased throughout Nike’s fiscal Q4, rising 2% year-over-year in March 2022, up 3% in April, and up 5% in May.
“Looking at Top Sellers on Nike.com, our data indicated sustained inclusion of high ASPs, which should support ongoing merch margin expansion.”
“Our $133 price target represents 32x our FY23 EPS and 25x our EV/EBITDA. We see EPS of $6.78 through FY26 driven by an +8% revenue CAGR, EBIT margin expansion to a high teens level, in line with Management’s LT target, and a mid-teens EPS CAGR. Given $6B + in average annual free cash flow (FY22E-FY26E), we think NKE could return $34B+ to shareholders over the next five years through share repurchase and dividend growth while supporting an ROIC in the upper 40s%,” concluded the analyst.
Nike shares have climbed over 1% Thursday.
