Deutsche Bank analysts resumed coverage on Nike (NYSE:NKE) stock with a Buy rating and a price target of $115, noting they believe Nike is making significant strides to transform its business, embarking on a multi-year innovation cycle expected to boost top-line trends and gain market share.
The analyst sees a compelling risk/reward profile at current levels, with Nike’s relative P/E near a 10-year low. Although the turnaround will take time, with a guided low single-digit sales decline in the first half of 2025.
The analysts remain optimistic about Nike’s innovation ramp-up ahead of the Paris Olympics, a strategic shift back to wholesale to better scale new products and regain shelf space, and strong relationships with key partners.
Expectations have been reset in anticipation of Nike’s first Investor Day in seven years this fall, with consensus modeling a mid-single-digit sales growth CAGR versus the long-term plan of high single-digit to low double-digit growth.
The analysts also see further potential for gross margin improvement from factors such as recaptured freight costs, limited recaptured promotions, and lower product costs. Additionally, there is potential upside from margin recovery in China, which currently lags pre-COVID levels by 670 basis points and accounts for 15% of sales.