Truist Upgrades Nike Shares to Buy, Says New Management May Rekindle Interest via Investing.com

Investing.com — Analysts at Truist Securities upgraded NIKE (NYSE: ) shares to buy, a move driven by optimism about recent leadership changes.

The price target was also raised to $97 from $83, reflecting an upside of more than 17% to Nike’s current trading price.

While acknowledging that Nike’s turnaround can be a long and uncertain process, Truist analysts believe new leadership, including the return of longtime veterans like Tom Peddie and incoming CEO Elliot Hill, can rekindle excitement around the brand.

A key factor in this update is management’s focus on restoring Nike’s wholesale relationships, which were neglected during its direct-to-consumer (DTC) expansion.

Truist believes that relaunching with retail partners such as Macy’s Inc (NYSE: ) and Designer Brands Inc (NYSE: ), and possibly setting up a store on Amazon (NASDAQ: ), could generate significant growth.

“With Elliot Hill and Tom Peddie at the helm, we believe Nike’s first strategic priorities will revolve around re-engaging with retail partners,” Truist analysts wrote.

The re-entry into Amazon’s platform, especially after recent improvements in Amazon’s counterfeit prevention, is seen as a potential “game changer”.

While financial recovery may take time, Truist remains positive about near-term catalysts such as Nike’s investment in marketing and endorsement deals. The signing of WNBA star Caitlin Clark to a multi-million dollar contract is highlighted as an underutilized asset.

“While a fundamental recovery remains a long-term prospect, we think some near-term wins from the new team should be enough to show investors that better times are ahead,” the analysts noted.

As for valuation, Truist says that while Nike shares aren’t “cheap,” the stock’s underperformance over the past year has created an attractive entry point for investors betting on a long-term recovery.

After three straight gains and guidance misses, Nike shares are down more than 30% since December 2023, compared with a 22% gain for the period.

“While the stock is currently trading at around 28.5x the Street’s trailing twelve-month EPS forecasts on a relative basis, NKE’s current ~32% premium to the S&P 500 is well below its 3-year average of ~ 60%,” analysts said.

“At these levels we think qualitative improvements that highlight that the new management team is aggressively pursuing a turnaround would be enough for the stock to outperform.”