By Ben Levisohn
In 2012, China?once the juice that fueled Nike?s (NKE) share price?had become an impediment to the company?s share price. No longer, say analysts at JPMorgan.
Analysts Matthew Boss, Anne McCormick and Michael Joyce upgraded Nike to an overweight from neutral today, calling the stock a ?a multi-year core portfolio holding.? One of the big reasons for the upgrade: China is much less of a problem. The analysts write:
While China?has been NKE?s Achilles heel over the past year (macro, excess inventory in the channel, fit/color issues), management?s turnaround game-plan appears firmly on track?with stabilization targeted over the next 2-3 quarters and a FY14 return to growth likely in our view.
Importantly, every 10% of China sales growth (-11.2% in 2Q13 vs. +21% growth in FY11/2012) equates to $250M of incremental revenues (1% of total top-line growth) or $0.08-$0.10 of EPS accretion (China EBIT margins substantially above co. avg)?
While we are not modeling a turn overnight, management is pleased with initial progress citing +10% DTC sales and wholesale same-store-sales turning positive in 2Q as a potential leading indicator of encouraging trends to come.
Combine that with a ?robust product pipeline? and a ?laser focus on total shareholder return,? and the stock should hit $64, the analysts say.
Nike has gained 0.8% today to $55.01 and has jumped 19% during the past three months.
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