Analysts: Nike Has Room For More Gains

Nike Inc (NYSE: NKE) shares are still in shape for further gains, despite a 22 percent run-up year-to-date, analysts said Monday.

The athletic footwear maker is set to post fiscal second-quarter earnings Thursday that should reveal continued gains in U.S. and Western European market share, as well as benefits from its expansion into womens' and "young athletes" apparel.

Bank of America's Robert F. Ohmes said Nike competitors in China have pulled in their horns, with a reduction of up to 25 percent in domestic sportswear stores since 2011.

That leaves a a wide opening in China, where Nike has been boosting its product assortment and opening a chain of "factory outlet" stores that Ohmes thinks will perform well in "second-tier" cities.

The company's global gross margin should expand on a successful program or boosting price tags on merchandise, while Ohmes said through effective currency hedging, Nike is "managing" headwinds from the stronger dollar.

Ohmes maintained a Buy rating and $110 target.

Despite Nike's relatively rich stock price relative to potential earnings, Deutsche Bank's David Weiner said its healthy profit margin and the general strength of the athletic apparel sector prompts him to maintain a Buy rating.

Weiner, who maintains a $105 target, said strong results in the recent second quarter "suggest a high bar" for Nike's upcoming earnings.

But likely continued strength in higher average price tags should result in margin gains and news from China is expected to be good, Weiner said.

"As long as Nike long as Nike is able to drive innovation and fresh design, customers are willing to pay a premium," Credit Suisse's Christian Buss, who maintained an Outperform rating and recently raised his price target to $105, from $100.

Analysts on average expect Nike to post third-quarter earnings of $0.70 a share, on sales of $7.15 billion, compared with year-earlier net earnings of $0.59 a share on sales of $6.43 billion.

Nike changed hands recently at $95.61, down 0.6 percent.