By Sam Boughedda
Morgan Stanley analysts said in a note Monday that the firm sees Nike (NYSE:NKE) slightly beating third quarter 2023 consensus estimates.
The analysts, who have an Overweight rating on Nike, raised the firm's price target on the stock to $140 from $138. They told investors that a "3Q EPS beat appears likely, though potentially less upside compared to last quarter."
"A number of data points signal upside potential to 3Q EPS: 1) Peers' better-than-expected Europe results (Puma, UAA, ADS, among others, & ~27% of NKE FY22 sales'), 2) encouraging intraquarter wholesale partner commentary on NKE's ongoing brand heat & 3) NKE's very conservative guidance, which suggests a material 3Q topline slowdown & deteriorating profitability," they wrote.
On the other hand, they acknowledged that "intraquarter channel checks suggest 1) broader NA sportswear demand has softened slightly as the region returned to a push market, & 2) promotional activity has worsened somewhat more than previously expected (as confirmed by Puma & ADS)."
However, while they expect these dynamics to offset some of the upside drivers, resulting in Nike potentially delivering less EPS upside than the last quarter, Morgan Stanley believes some EPS upside is still achievable and that a guidance raise is likely.