On Thursday sportswear giant Nike (NKE) reports its fourth-quarter results after the bell. Investors will be keeping an eye on Nike’s China sales, digital platform, and the company’s performance during the coronavirus pandemic. Analysts polled by Bloomberg predict Nike will report adjusted earnings per share of 10 cents on revenue of $7.4 billion.
Despite a predicted hit from the virus outbreak, several analysts say the company has a bright future fueled by its strengthening e-commerce platforms and its progressive stances on social justice.
“Nike is the king of the hill,” analyst Sam Poser of Susquehanna Financial Group told Yahoo Finance, but he does acknowledge that Nike is coming out of a challenging quarter. “Q4 is going to be a tough quarter; there’s no doubt about it … There’s nothing you can do about it, it’s really what they’re going to say about next quarter. How well they weather, they tell you about how well the store reopenings are going, and how order flow may look right now.”
Poser believes that Nike’s digital platform prowess will carry the company past any Q4 pandemic setbacks.
“If their digital businesses are working the way I think [they’re] going to work, regardless of what the results are for the fourth quarter, people are going to see through that, and that’s why the stock is just ripping.”
Susquehanna has raised its price target from $100 to $130.
Like Poser, UBS analyst Jay Sole believes that despite the hit that the brand will take from the pandemic, Nike’s best days might lie ahead. UBS recently raised its 12-month price target for Nike to $122 up from $114.
“I think that on the one hand, you know, their results are going to show a significant negative [COVID-19] impact. I think that there’s just very little way for them to completely offset the fact that — their stores were closed for two months, roughly speaking.”
Sole reminds Yahoo Finance that many of Nike’s partner stores, such as Foot Locker (FL), were shut down as well. Though Nike will likely report robust online sales during the pandemic, Sole notes that online sales typically account for only 20% of Nike’s total sales.
Despite the adverse effects of COVID-19, Sole believes that Nike will come out of the pandemic stronger in part because they have been winning over hearts and minds with stances on social justice such as its recent “Just don’t do it” response to the killing of George Floyd.
“So I think all those things will show up in their fourth-quarter results, at the same time, and probably more importantly, I think the results are also going to show within that there’s been a real trend toward athletic wear and people wanting to work from home wearing more casual clothing especially and I think that within the world of athletic wear Nike is really taking mind share.”
[Read more: Nike responds to George Floyd attack: Don’t do it — ‘Don’t turn your back on racism’]
‘A great brand is a story that never ends’
Sole points towards Nike’s new rumored collaboration with rap superstar Drake as proof that the brand knows how to keep the momentum rolling.
“At the end of the day, it does come down to product and, you know, you know, Nike can have a really great moment, a great couple of months, but you know, in a couple of months people are like, ‘Well, what are you? what’s happening now?’ The definition of a great brand is a story that never ends. And, you know, where’s the story going to go from here. It probably has a lot to do with the product.”
John Kernan of Cowen Equity Research says that even though there’s a lot of uncertainty with Nike on gross margin markdowns throughout the channel, he would not be surprised if the Swoosh brand saw its digital platforms up triple digits year over year.
“I think all their new styles are resonating and the innovation’s there. I think longterm people are excited to see this company’s digital transformation. So I think people will look at the results, they’ll want to see inventory under control. But I think they’ll look through a lot of the Q4 disruption and really start thinking about what the earnings power is in two or three years as you get this massive transformation towards digital.”
Like Poser and Sole, Kernan predicts that Nike will be light when it comes to guidance for next quarter.
“I think they’ll talk to a few trends like sales and maybe gross margin, but that’s it. That’ll give you a pretty good idea as to where things are going to shake out from an EPS standpoint. But again, if you get the triple-digit plus digital growth, which I think it will, we’ll have to give them a lot of credit for that.”
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.