Nike (NKE +1.00%) stock has been under pressure over the past several months. Shares have dropped 15% in the last three months after the company said it expected slower sales near-term growth when it last reported quarterly earnings.
But Guggenheim analyst Robert Drbul thinks the stock has been punished enough and just called Nike his "Best Idea" for 2024. The senior managing director and equity research analyst for the firm thinks Nike stock will reach $130 per share as "management is laying the groundwork for many launches of product to deliver an acceleration in top line growth in the second half of 2024 and into 2025."
NYSE: NKE
Key Data Points
Running shoes are what's in
Drbul's "buy" rating on Nike is mostly based on the potential to improve in the running category. Competition in that category has been on the rise. For example, On Holding running shoes are gaining popularity. That company just reported strong results for 2023. On's sales increased by about 50% last year.
But Drbul thinks there's more room for Nike to grow in the running category too. Results should also be aided by lower supply chain and freight costs, he believes. The analyst specifically thinks the Air Jordan line can still contribute to growth, especially with this summer's Olympic Games highlighting the Nike brand.
Nike shares have been trailing the market for several years now. The stock has dropped nearly 30% over the last three years. But the company and its stock could gain back momentum when the latest versions of its Pegasus and Alphafly sneakers come out in April.
With the stock having underperformed the market, Drbul thinks now is a good entry point and sees about 30% upside. He notes that "the long-term financial framework the company laid out in 2021 remains quite attainable, but could take longer than we previously anticipated." Investors will get an update when Nike reports quarterly results again on March 21.
