What's Driving Nike's North America Recovery?
Innovation and digital investments have allowed the wide-moat firm return to positive growth in the region.
We view wide-moat
Nike's momentum heading into fiscal 2019 gives us greater confidence in its full-year guidance--including high-single-digit growth (up from the midsingle to high single digits), gross margin expansion of 50 points or more (our preliminary model is coming out at between 70-80 basis points of improvement), and SG&A expense growth at the same pace of revenue--but also leaves the door open for upside opportunities. Over the next five years, our model is aligned with management's financial targets calling for high-single-digit annual top-line growth and midteens EPS growth. We're planning a modest increase to our $70 fair value estimate for the time value of money, and while we view shares as fairly valued, we still like Nike's growth/income balance (including a new four-year $15 billion share-repurchase program).
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