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Foot Locker Stock Surges 5.0% on Wells Fargo Upgrade

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Rating upgrade

On September 10, Foot Locker stock rose 5% after Wells Fargo analyst Tom Nikic upgraded the stock to “outperform” from “market perform.” On a year-to-date basis, Foot Locker stock has gained 4.7%. Nikic also raised the target price to $58.00 from $50.00 earlier.

As of September 10, out of the 23 analysts covering the stock, 57.0% rated FL stock a “buy.” Another 30.0% rated it a “hold,” and the remaining rated the stock a “sell.” Analysts’ 12-month average target price for FL stock is $55.95, which reflects a ~14.0% upside based on its September 10 stock price.

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Why the upgrade?

As per a MarketWatch report, Nikic upgraded Foot Locker on Nike’s (NKE) innovative products like Air Max 270. Also, the easing of troubles for Nike’s Jordan brand and for its European operations drove the upgrade. Nikic said, “As a result, we believe Foot Locker will show accelerating positive comps in 2H (+2% in Q3 and +3% in Q4), and we believe sustained improvement in the Nike assortment can drive 3%-4% comp growth over the subsequent 12-24 months (even if their second-largest supplier, Adidas, were to turn negative).”

Nike’s Air Max has been a growth catalyst for Foot Locker. At its second-quarter earnings conference call, Foot Locker CEO Dick Johnson stated that Air Max’s Tuned Air and Air Max 270 saw a robust performance in the kids’ footwear category. In the women’s footwear category for Foot Locker US, Nike’s Air Max along with Vans drove the comps growth.

Johnson stated that the company is positioned to witness comps growth in the latter half of 2018. This comps growth is expected to be driven by its expanded premium product portfolio and improving product flow. He added that Foot Locker Europe could witness growth in the latter half of 2018 due to the product flow and new assortment from Nike. Management expects comps to increase in the low single digits in the third quarter.

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