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Barclays analysts upgraded Nike (NYSE:NKE) to Overweight from Equal Weight with the price target raised to $154 per share, up from the prior $110.00.
They took note of a “significant” FQ2 beat, which demonstrated Nike’s “broad-based brand strength in spite of a weakening consumer macro backdrop,” the analysts wrote in an upgrade note.
The key factor behind the upgrade is a “high probability of margin upside.”
“Combining improving freight relief as we enter FY24 with reduced promotional pressure, we believe the visibility on gross margin recapture is significantly improved. Brand strength and a deep pipeline of high heat innovation is driving strong full-price reception to new footwear launches in both the DTC and wholesale channels,” the analysts added.
As far as China is concerned, the analysts highlighted the second consecutive quarter of CC (constant currency) growth.
“Although there remain questions on when Greater China will return to its long-term algorithm of positive low- to mid-teen growth, it seems that a full China reopening could achieve that growth over the next 12 month horizon,” they added.
Nike shares trade about 1.5% higher Thursday. The stock is up 2.1% year-to-date (YTD).
