On Friday, Citi reiterated its Buy rating on Nike (NYSE:NKE), maintaining a $102.00 price target, which aligns with the broader analyst consensus showing potential upside of 17%. The firm's commentary highlighted expectations for Nike's second quarter 2025 earnings per share (EPS) to be at $0.58, which is below the consensus of $0.64.
The anticipated shortfall is attributed to weaker gross margins (GM), currently at 45%. The firm noted that investor uncertainty is heightened ahead of new CEO Elliott Hill's first discussion with investors, particularly as key retailers have reported increased promotions in the market. According to InvestingPro analysis, Nike currently appears undervalued, with 12 key insights available to subscribers.
The analysis by Citi suggests that under Hill's leadership, Nike is taking a more aggressive approach to clearing excess inventory in its key classic franchises. This strategy is expected to result in near-term gross margin pain and could lead to further reductions in fiscal year 2025 consensus estimates, which currently stand at $2.78 compared to Citi's estimate of $2.35.
The firm anticipates that Hill will outline a timeline for when the company expects the market to stabilize, with a general expectation that inventories will be balanced by May 2025. Despite these challenges, InvestingPro data shows Nike maintains strong financial health with a current ratio of 2.36 and manageable debt levels.
Furthermore, Citi expects Hill to share his initial strategies for returning Nike to growth, particularly important given the projected 8% revenue decline for FY2025. Amidst the uncertainty of potential adjustments on Hill's inaugural earnings call, Citi believes the risk/reward for Nike's stock is balanced heading into the second quarter earnings report. The firm's stance remains positive, with the price target unchanged, suggesting confidence in Nike's long-term prospects despite the near-term headwinds faced by the company.
For comprehensive analysis of Nike's financial health and growth prospects, access the full Pro Research Report available on InvestingPro.
In other recent news, Nike Inc (NYSE:NKE). has been experiencing significant developments. The company reported a decrease in revenue over the last year, dropping to $50.01 billion.
Despite this, Nike announced a 10-year extension of its partnership with the National Football League, aiming to expand football's global reach and enhance player safety.
Analyst firms Baird and Needham have maintained an Outperform and Buy rating on Nike, respectively, while Stifel maintained a Hold rating and TD Cowen reduced the price target from $78.00 to $73.00, keeping a hold rating.
Additionally, Nike has seen a leadership transition with the appointment of Treasure Heinle as the new Executive Vice President and Chief Human Resources Officer. Furthermore, the company announced an 8% increase in its quarterly cash dividend, marking the 23rd consecutive year of such increases.
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