Nike Inc. (NYSE:NKE) received a buy rating increase from Citi on Monday, with a $135 target price. Citi’s increasing faith in Nike’s capacity to protect earnings per share (EPS) in 2024 and 2025 in the face of economic uncertainty is the reason for the upgrade. Expectations of a gross margin (GM) recovery, propelled by elements like fewer freight expenses, simplified inventory, fewer promotions, and the advantages of a direct-to-consumer (DTC) mix, are what are driving this confidence. Analysts predict that Nike will strengthen its position, especially in China, by starting its GM recovery in the second quarter of F24 and continuing into F25.
Citi projects Nike will release new goods in 2024, just in time for the Paris Olympics, highlighting the company’s ability to withstand macroeconomic uncertainty in China. Analysts predict that in Q2 F24, Nike would miss GM targets but not meet revenue expectations. They anticipate a cautious sales forecast for H2 F24, with a focus on EPS targets through higher GM and better management. According to Citi, Nike is a distinctive brand that has clearly recovered its margins and offers a good risk/reward ratio. An ETR of 15%+ or 25%+ for high-risk companies is implied by a Citi “Buy”.
What was the reaction of the stock? In premarket trade, Nike’s stock shot up from $115.72 to $118 dollars. Nike’s opening price for the regular session was $117.54; at closing, the company had gained 2.33% to close at $118.61.
The Upgrade of ZScaler
What happened? Zscaler Inc. (NASDAQ:ZS) was upgraded to Outperform by Macquarie on Tuesday, with a $231 price objective.
The entire narrative: According to a research note released on Tuesday morning, ZS’s Risk360 solution and strategic location at the nexus of cyber threats and SEC reporting requirements support Macquarie’s bullish outlook.
Using their SaaS mature margin analysis framework, the analysts evaluated ZS and estimated possible long-term mid-range 40s% non-GAAP operating margins. According to Macquarie analysts, ZS’s Risk360 solution and its strategic location at the nexus of trends in cyber threat and SEC reporting requirements are responsible for the upgrade.
Their upbeat outlook is supported by a fresh price objective of $231, which indicates a reasonable 13.8x FY2E EV/S. “Outperform” in Macquarie’s language means an expected return of more than 10%.
What was the reaction of the stock? In premarket trading, ZScaler shares shot up from a low of $204 to almost $208. The regular session started at $207 and ended at $210.79, which was the closing price.
On Wednesday, Truist began covering Microsoft Corporation (NASDAQ: MSFT), with a street-high price target of $600 and giving the stock a Buy rating. Truist analysts are upbeat about MSFT’s prospects because of the business’s impressive results in the generative AI space. They expect mid-teens expansion and significant growth in sales and free cash flow. The analysts predict that MSFT’s outstanding performance in AI, Azure, and Copilot could result in compounding significant returns as the AI market grows, with shares already up over 55% in 2023.
Analysts expect investors to consider the upside possibilities, and Truist believes that as projects move towards production, Microsoft (MSFT) will perform better than expected. The “Buy” rating on Truist denotes an anticipated superior performance over the following 12 to 18 months when compared to the S&P 500 or any applicable benchmark.
Microsoft shares reacted by shooting up from $375 to $376.50 in premarket trading, opening the regular session at roughly $374, and closing in the middle of the $373 to $376 range. Furthermore, Morgan Stanley upgraded Live Nation Entertainment to Overweight and set a $110 price objective.
Morgan Stanley has high hopes for LYV shares, estimating double-digit EBITDA growth driven by Venue Nation and the growth of overseas fans. The Tier 1 bank expects stronger FCF generation to boost valuation and predicts near pre-pandemic EBITDA levels with an expected 11% 3-year growth CAGR through 2026. Despite LYV’s somewhat higher forward EBITDA multiple, analysts set a $110 PT for the company, implying a 25% upside, which is warranted by LYV’s growth profile and FCF conversion relative to peers.
Morgan Stanley has reinforced its OW rating, which indicates that a stock’s expected total return over the next 12–18 months will exceed the industry average, by projecting a 65% upside in their bullish scenario of $145 and over 25% downside in their bearish case of $65. Morgan Stanley is optimistic about the risk/reward scenario.
In terms of stock response, Live Nation closed the regular session at $93.04 after opening at $91.25 on the day.
Regarding First Solar, Jefferies began covering the company on Friday with a $211 price target and a Buy rating.
When Jefferies first began covering First Solar, they gave four main justifications for their optimism:
- a substantial backlog that is fully reserved through 2026.
- promising futures for utility-scale solar, surpassing growth in domestic solar.
- Fixed ASP with expandable capacity and a lowering cost structure.
- Margin improvements from IRA are anticipated as market clarity grows.
Analysts at Jefferies are upbeat about First Solar’s utility-scale exposure and secure backlog, which will protect the business from cyclical changes in the industry. In line with the lower end of the company’s projection, they anticipate advantages from the significant 82GW backlog, potential ASP upside, and a gross margin improvement from 18% in 2023 to 25% in 2025.
First Solar’s ability to leverage US IRA credits is highlighted by Jefferies, which could lead to an increase in gross margins to approximately 53% by 2025.
According to Jefferies’ nomenclature, “Buy” designates stocks expected to generate a 15% or higher total return over a 12-month period (price appreciation + yield).
Regarding the stock’s reaction, First Solar opened at $165.35 and ended the regular session at $168.67.
