Nike CEO change unlikely to slow business, Wall Street analysts say

Nike's business outlook remains strong despite the sportswear giant’s announcement this week that longtime CEO Mark Parker would cede his title to board member John Donahoe, according to Wall Street analysts.

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Donahoe, the current CEO of cloud computing firm ServiceNow and former CEO at eBay, will spearhead Nike’s ongoing shift from traditional retail to an increased focus on direct-to-consumer sales. Parker, who oversaw strong financial results at Nike but drew criticism for his handling of internal scandals, will remain with the company as executive chairman at the board.

“In our view, Donahoe's strong connection with the Nike brand and expertise in information technology and digital commerce make him well suited to build on NKE's digital momentum and Consumer Direct Offense,” CFRA equity research analyst Camila Yanushevsky wrote  in a note to investors.

CFRA maintained its “Buy” rating on Nike shares and raised its 12-month price target $5 to $105.

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NKENIKE INC.
$93.04
+1.77 (+1.94%)

As more customers shop online rather than at brick-and-mortar stores, Nike has made heavy investments in its “consumer direct offense,” an overhaul of its e-commerce operations and pipeline to bring new products to market. Parker said Nike’s digital sales rose 42 percent in its most recent fiscal quarter, and the company cited e-commerce growth as a key factor in earnings results that exceeded expectations.

Nike shares are up more than 20 percent so far this year.

UBS analyst Jay Sole expressed “mild concern” about Donohue’s lack of hands-on experience running a sportswear brand, but said the CEO change should be a “modest positive” for Nike’s stock going forward.

"The good news is Nike has made this move from a position of strength (sales trends remain robust) and set a plan for a smooth transition," Sole said. "This increases the likelihood in our view Nike's long history of strong EPS growth can continue into the out-years."

UBS maintained a “neutral” rating and $95 price target for Nike’s stock.

Parker had served as Nike’s CEO since 2006 and its president and chairman since 2016. He drew scrutiny in recent weeks amid reports that he had direct knowledge of experiments with performance-enhancing drugs conducted at Nike facilities.

“I am delighted John will join our team,” Parker said in a statement announcing his upcoming exit. His expertise in digital commerce, technology, global strategy and leadership combined with his strong relationship with the brand, make him ideally suited to accelerate our digital transformation and to build on the positive impact of our Consumer Direct Offense.”

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