Nike Inc. (NYSE: NKE), which is still struggling with a sales slump, has released its latest earnings report. This shows that the turnaround strategy of its CEO Elliott Hill seems to be working.
The athletic footwear retailer reported a better-than-expected third quarter revenue after-hours. However, the number still represents a 9.0% year-over-year decline, primarily due to the continued material weakness in China.
Nike shares continue to rise in extended hours, as the company’s earnings of 54 cents per share were well above 29 cents per share in Q3.
Could Nike regain dominance?
According to Matt Powers, Powers Advisory Group, Nike Inc. has already moved into the action phase with its new chief executive.
Investors aren’t too upset about the company’s earnings because Hill has already told investors that Nike is an enormous ship and it will take some time for it to turn around.
Powers is still bullish about Nike stock, despite some weakness in Q3. “Inflation will stabilize eventually, Nike will adapt and we expect that it will regain some dominance.”
Powers recommends that you own NKE shares because they offer a healthy dividend yield at the time of writing, which was 2.23%.
Is Nike stock expensive?
Investors should be aware that Nike stock at current levels is not cheap to own.
On Holding’s forward price to earnings multiple is currently around 40, which is about the same.
The latter is, however, currently experiencing a rapid growth.
NKE shares are expensive compared to Deckers or Under Armour. Both of these companies are trading at about 20 times their current price.
Analysts are hesitant to abandon Nike Inc.
The consensus rating for the iconic name is currently “overweight”, with a median price target of more than $84 representing a 13% increase from here.
What Nike expects from the future
The New York-listed company did not update its guidance for 2025 on Thursday.
The management confirmed that the outlook for this year’s second half is the same as what was communicated in December.
Matt Friend, chief financial officer of the company:
Nike’s operating environment is dynamic. But what matters most is that it serves athletes with new product innovations and re-ignites brand momentum through sports.
Simeon Siegel, senior analyst at BMO, said earlier this week that Nike is fixing its problems through new products and storytelling.
It’s still worth noting that Nike’s stock is down more than 25 percent from its 52-week peak of just over $100.
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