Shares for Nike Inc. are up in Monday morning trading, bolstered by analyst upgrades, despite continued worries of coronavirus-related headwinds.
UBS increased the price target for the sportswear giant to $136 per share from $103, while J.P. Morgan Securities lifted its price target to $111 from $110 and added the stock to its focus list. The bullish views come after ongoing concerns over the virus outbreak, which originated in China, sent the Dow Jones Industrial Average down 600 points on Friday. It marked the steepest single-day loss since August, with Nike, a blue-chip stock, dropping 9% in the past couple of weeks.
In a distribution note on Monday, UBS analyst Jay Sole upgraded the athletic brand to buy from neutral, citing investments in its supply chain, e-commerce and product innovation. He noted that he expects the stock’s valuation to improve as the market “realizes how Nike’s business model changes will make the company worth much more long-term.”
J.P. Morgan analyst Matthew Boss recommended buying on the dip in shares, adding that the pullback is “a multiyear buying opportunity.” Like Sole, he attributed the positive note to Nike’s innovation and product pipeline. Boss, however, pointed out Nike’s reliance on “Greater China,” which represents 16% of the brand’s revenues as well as 23% and 27% of its apparel and footwear sourcing, respectively. “We expect management’s tone on China (consumer/sourcing) to be a key investor focal point,” he said.
As of 12 p.m. ET, Nike’s stock advanced 4.3% to $100.41.
On Sunday, after the Outdoor Retailer Snow Show wrapped in Denver, Susquehanna Financial Group analyst Sam Poser wrote in a distribution note that uncertainty around the virus has become a major focus of conversation for big firms with production facilities and retail stores in China.
“There is major concern, and all companies are taking safety precautions,” Poser wrote. “As the news regarding the virus is changing daily, all company managements with whom we spoke said that it’s too early to evaluate the long-term business impact, but those management teams were more concerned about the impact on the Chinese consumer than they were about the impact on production.”
China now has more than 17,000 confirmed cases of the coronavirus, which has already killed 361 people. The first coronavirus fatality outside the country was reported in the Philippines over the weekend.
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