Oppenheimer's Brian Nagel shares his bull case for Nike

Melissa Lee (Host of Fast Money) 00:00.070

shares of nike down nearly thirteen percent since it gave disappointing guidance during its earnings call last thursday the stock has lost almost a quarter of its value this year but oppenheimer ranks the athletic wear maker a top play for twenty twenty six and it's one hundred

Melissa Lee (Host of Fast Money) 00:13.270

twenty dollar price target is the highest on the street this according to fact set oppenheimer senior analyst brian nagel is behind that call he joins us now brian great to see you

Brian Nagel (Senior Retail Analyst) 00:22.230

nice seeing you too what

Melissa Lee (Host of Fast Money) 00:23.470

did you hear on the earnings call that makes you think that it's the top pick for next year well

Brian Nagel (Senior Retail Analyst) 00:28.890

look i mean i think you know for me the biggest pause of here with nike and i mean recognizing this is a very large company undertaking a turn around but i think the biggest positive is that where this management team has focused they're seeing success now so if you dig through

Brian Nagel (Senior Retail Analyst) 00:42.970

all those results and they highlighted this on their call and in their in their results but what you've basically seen is much better wholesale growth in north america you know that's being driven by now a clean marketplace but more importantly the new products they've

Brian Nagel (Senior Retail Analyst) 00:56.690

introduced particularly in the categories and some other areas that china is still weak there's still weakness outside north america DTC is still weak but again for me that really counts here what it gives me confidence in this call into twenty twenty six is where the management

Brian Nagel (Senior Retail Analyst) 01:12.990

team has focused they are seeing success and i think that focus will just keep basically cycling through this enterprise and at some point the whole thing will be working

Melissa Lee (Host of Fast Money) 01:21.950

the new shoes do seem to be resonating brian i'm just curious though if you assume that china is going to continue to be weak which i think a lot of people do assume i mean can nike still have that turn around ex china

Brian Nagel (Senior Retail Analyst) 01:34.350

no look that's a great question i i think the answer is yes OK i mean china is obviously important to nike it's important for nike 's longer term growth prospects OK but there's a lot of opportunity here within this very big company to turn around while china may still be

Brian Nagel (Senior Retail Analyst) 01:49.670

languishing now all that said you know if you go back to the comments that CEO elliot hill made on the conference call last week you know they're they're basically enacting a north america style turn around in china now it doesn't mean it's going to happen overnight but i think

Brian Nagel (Senior Retail Analyst) 02:04.430

the the positive here is they know how to do it again clean out the marketplace introduce better innovation that resonates with consumers so they have the playbook it's going to take a while but look i think nike can there's a lot of areas that can continue to turn around here

Brian Nagel (Senior Retail Analyst) 02:18.190

before china is fixed

Tim Seymour (Fast Money Contributor) 02:20.230

brian it's tim i tend to agree with you on the view here i guess i'm a little surprised that the price target which you know where you put that into an either an EPS profile or a multiple why do you need to be at one twenty because that you know i'm not sure where you have your

Tim Seymour (Fast Money Contributor) 02:34.510

target on twenty six EPS but the the math says that it's north of fifty am i wrong on that because again i'm bullish but i don't see the EPS turn around as quickly as your share target suggests

Brian Nagel (Senior Retail Analyst) 02:48.640

yeah look so we tend to at oppenheimer we tend to set our price targets with a twelve to eighteen month horizon OK so that's you know we consider you know in our terms they were kind of intermediate maybe even longer term target so that that's how that's kind of time frame i'm

Brian Nagel (Senior Retail Analyst) 03:02.280

looking for me and i you know i think the components here you want or earnings are very depressed OK so what you know we've seen you know nike has struggled they had the wrong product OK they they they're consumers to a certain extent you know turned away from the brand OK so

Brian Nagel (Senior Retail Analyst) 03:17.240

that earnings the sales and earnings negative but more more recently there's been a lot of this you know repositioning effort OK so like i mentioned a moment ago you know nikes very aggressively cleared old product there's been a cost associated with that and then more recently

Brian Nagel (Senior Retail Analyst) 03:33.150

than that you've had tariffs you know and i think it's a very interesting conversation because when nike is basically saying is that the tariffs will cost them one point five billion dollars OK right now they're not offsetting those tariffs so that one point five billion dollars

Brian Nagel (Senior Retail Analyst) 03:48.550

is basically weighed upon profitability over the next year year and a half nike will work to offset those tariffs but with that all basically means is if you look at earnings right now for nike they're depressed OK and i want to think about that price target you know i think

Brian Nagel (Senior Retail Analyst) 04:03.390

what you're going to see is the earnings go from depressed to normalized over time and basically the markets start to really respect the longer term earnings power of this model and apply a healthy multiple to that and that's basically how i get to that one twenty target