Wells Fargo analysts said the firm sees value opportunities at current levels for Nike (NYSE:NKE) and Academy Sports + Outdoors Inc (NASDAQ:ASO). The analysts moved ASO's price target to $68 and cut the price target on Nike to $138 from $142.
They told investors in a note Monday that they are lowering their ASO 1Q/2Q/2023E sales and EPS estimates below consensus following weaker low-to mid-tier consumer data points and looking at store traffic levels.
In addition, the analysts noted that Placer.ai data shows ASO's first quarter traffic -13% YoY--a 300bps deceleration from the fourth quarter, with particular weakness into March/April.
However, "while we expect a 1Q miss/2023 guide-down, we see the shares as washed out at ~7x our updated estimates, especially considering still, early-stage footage story and, in our view, multiple cushions to margins into 2023 between operational improvements still in middle innings, controlled inventories, along with balance sheet support including buybacks," wrote the analysts.
For Nike, the analysts said incomings have been ticking up, and the bull case for the stock into FY24 is an accelerating China, clean inventories, and GM recapture.
The analysts said the Nike risk/reward is favorable for a best-in-class asset with a leading share position in an attractive category and with a fortress balance sheet.
"We expect investors looking for discretionary exposure will be willing to look past NT volatility and ahead to FY25's opportunity to get back on-algo," the analysts stated.