Sports apparel company Nike Inc. (NYSE:NKE) is put to the test by Credit Suisse analyst and outperforms competitors by e-commerce performance standards. Separately, Lowe’s Companies, Inc. (NYSE:LOW) meets with Merrill Lynch analyst to discuss market opportunities and the company’s progress in several sectors. Both events led analysts to reiterate bullish ratings for the companies. Let’s see why.
Analyst Christian Buss of Credit Suisse conducted an e-commerce performance test on Nike, Finish Line and Foot Locker. The analyst found Nike to excel and score highly across all metrics, with a significant gap between Footlocker and Finish Line numbers. The analyst believes Nike will continue to excel in the e-commerce arena and thus reiterates an Outperform rating with a $68 price target.
In terms of the test, the analyst briefly explains how Nike outperformed its competitors. He explains, “Our test showed Nike is outperforming competitors in the execution of online services, with ordering, processing, shipping, and delivery leading multi-brand competitors.” He continues, “Nike also offered the most refined model for looking at available inventory, tracking orders once they had been placed, and facilitated the easiest returns process for consumers.”
The analyst is also excited about Nike’s mobile applications. He states, “We believe the rollout of the new Nike+ mobile application will further allow Nike to craft their messaging and utilize their connected platform capabilities.” He explains, “With 8 applications currently, the investment behind a more streamlined platform for fitness tracking, personalized training, and exclusive new product could have the power to enhance Nike’s online penetration even further.”
According to TipRanks, Christian Buss’s predictions are profitable 60% of the time, delivering an annual average return per recommendation of 5.2%. Among Buss, fourteen more analysts gave NKE a Buy rating, and two remained on the sidelines. Overall, the ratings amount to a 12-month price target of $71.00, marking a 17.73% upside from current levels.
Lowe’s Companies, Inc.
Lowe’s management met with Merrill Lynch analyst, Denise Chai, to share strategies and market projections. Several takeaways from the meeting led Chai to reiterate a Buy rating with a price objective of $88.
The conversations with Lowe’s CEO and CFO suggest that the company is in good shape on many fronts. She explains, “LOW is confident on the state of the consumer, the home improvement market and achieving stronger and more consistent margin accretion. With better systems in place and a greater focus on reducing corporate overhead and payroll expense, the company is much better positioned to deliver on its margin targets for the next several years.”
The analyst points to Lowe’s Pro website, another market the company is addressing, and it seems to be growing quickly. She explains, “Within the next three to four years, LOW believes that it can get the Pro business to 35-40% of sales from about 30% currently (HD is 40%).” The analyst also provides the circumstances that should facilitate this growth. She states, “Higher Pro growth is expected on: 1) the expansion of pro- centric brands; 2) adding incremental depth of inventory to accommodate job lot quantities; 3) providing value through a 5% discount through the LOW card and quote support; 4) the addition of 160 account executives (AEPs) and another 35 in 1H16; and 5) the rollout of LowesForPros.com.”
The analyst also covers Lowe’s recent acquisition of Rona and the market’s perception of the deal. She states, “Management indicated that upside from the Rona acquisition will be ahead of what the market is anticipating as the full synergies have not yet been disclosed.” She continues, “LOW sees an opportunity for Rona to generate a return above its cost of capital and in time, lead to higher buybacks than if the business had not been purchased given higher cash flow.”
According to TipRanks, 60% of Denise Chai’s recommendations are profitable, providing an average return per recommendation of 6.6%. Among Chai, in the past three months, five other analysts gave the stock a Buy rating, and two remained on the sidelines. The 12-month price targets average at $83.43, marking a 10.74% upside from current levels.