While shares of Nike Inc. dipped slightly Wednesday after the company reported better-than-expected first-quarter earnings, bullish reports arrived from Wall Street touting Nike’s innovation platforms and accelerated growth in North America.

On Wednesday, shares fell $1.09 to $83.70 and had traded as low as $81.95 during the day. On Thursday, shares recovered, adding 84 cents to $84.54. Nike’s shares are ahead about 34 percent on the year.

Analysts said the pullback in shares was largely due to overly-high expectations. Nike also didn’t lift the company’s full-year forecast despite beating Wall Street’s consensus estimate by 4 cents due to foreign-exchange headwinds. Nike officials further provided conservative guidance for Q2.

But the reports from Wall Street praised Nike’s improved execution under the company’s Consumer Direct Offense initiative while also highlighting Nike’s 34 percent currency-neutral growth in digital revenues, improving gross margin rate and stringent cost controls.

“Buy any weakness,” wrote Susquehanna Financial Group’s Sam Poser in a note. “A robust new product pipeline and more focused marketing strategy is just beginning to ramp up already healthy revenue and margin growth across categories and geographies.”

Poser, who has a “Positive” rating on Nike’s stock with a $100 price target, particularly called out the improved momentum for Nike Brand in North America, including a return to wholesale growth. He noted that Nike’s first quarter marked the first time in two years that North-America revenue growth exceeded low-single digits, and he expects further acceleration in both Q2 and Q3 as comparisons ease further. North American growth improved from 3.3 percent in Q418 to 5.6 percent in Q119.

“NKE appears to be successfully balancing scale vs. scarcity and re-establishing its pull model in North America,” wrote Poser. “Benefits from a robust product pipeline are beginning to fully materialize, and we believe that NKE will continue to benefit from further iterations of new product offerings as well as improved product flow over the next 12-18 months.”

Poser also called out the continued robust digital growth, international momentum and margin improvement. He also noted that Nike Sportswear (NSW) led category growth and the collection is beginning to gain traction at retailers such as Nordstrom. Added Poser, “Importantly, NSW appears to be making inroads with women, an area where the company has historically had trouble hitting the mark. Additionally, as the higher-margin apparel business continues to outpace the footwear business, we expect a meaningful gross margin tailwind in FY19 and beyond.”

At Wedbush, Christopher Svezia, who has an “Outperform” rating on Nike with a price target of $90, said the stock’s pull back offers “a buying opportunity for a resurgent company that is solidly executing strategy, is seeing record consumer engagement and has an improved underlying outlook.”

In a note, Svezia wrote that he believes the EPS beat was driven mostly by a better-than-expected SG&A rate, but he also noted that merchandise is selling at full price, and every segment saw EBIT margin expansion except for flat margins in the EMEA.

“Management continues to execute solid strategies with the 2X and the Consumer Direct Offense, bolstering both sales and margins,” wrote Svezia.

Underlying sales are also exceeding internal plans due to the successful innovations and improving engagement, and growth “appears sustainable” across key geographies. Gross margin likewise presents another area for upside given increasing ASPs (average-selling prices), clean inventories and higher digital penetration.

Wrote Svezia, “The underlying outlook for the company has again improved, and there continues to be upside opportunity in FY19 on both sales and gross margin, key ingredients to generate multiple and share price expansion.”

At Stifel, Jim Duffy, who has a “Buy” rating at a target price of $96, was particularly pleased to see the uptake of new innovations with VaporMax, Air Max 270, React and ZoomX already adding more than $2 billion in retail sales. He also pointed to the continued strength in digital and accelerating growth in North America, China and APLA.

Duffy wrote, “With strong full-price selling, the favorable mix to digital and tightly managed inventories, we remain bullish about prospects for margin improvement.”

Commentary around Nike’s fiscal second quarter and second half further implies an upward bias to gross margin guidance for the full year. Wrote Duffy, “Nike continues to execute towards its plan to evolve the business towards a faster, more innovative and consumer-centric model. Ultimately, these investments are likely to drive improved ROIC, and justify a higher earnings multiple. Despite incremental FX headwinds, we are raising revenue estimates modestly and maintaining estimates for EPS helped by upside to estimates in FY1Q.”

At Canaccord Tenuity, Camilo Lyon, who has a “Buy” rating on Nike at a price target of $95, wrote that while Nike’s sales growth of 10 percent was short of his bullish target of 12.5 percent, “we are encouraged by the high quality of growth” as shown by the 52-point basis point improvement in gross margin.

Lyon particularly called out the renewed momentum in North America with the aid of a strong response to newer platform innovations. He also noted that despite being down, Nike officials indicated that Jordan Brand had returned “to a pull market,” and he expects that brand will resume growth early next year.

Added Lyon, “Most importantly, the company is showcasing strong execution across all three elements of its triple-double strategy: 2x innovation (exciting product pipeline including Air Max 720, Zoom X, Peg Turbo, a digitally powered adaptive footwear platform), 2x direct (Nike Live store concept expanding to two new flagships, NYC and Shanghai) and 2x speed (+DD growth in many key cities with Express Lane). With momentum across the business building, we reiterate our BUY.”

At Cowen, John Kernan, who has a “Market Perform” rating at a price target of $81, likewise positively cited Nike Brand’s acceleration in North America, including a return to wholesale growth and particular strength from Jordan.

Kernan noted that inventories were flat year-over-year while sales grew 10 percent, only the third time sales growth outpaced inventory growth since 2015 and the best sales/inventory spread for Nike since 2010. Wrote Kernan, “This scenario gives us confidence in management’s full year FY19 guidance which calls for gross margin expansion +50bps or slightly greater, which may prove conservative.”

On the more cautionary side, Kernan noted that Greater China’s 20 percent currency-neutral growth led the regions but represented a deceleration from 25 percent growth in Q4.

Overall, Kernan wrote that while Nike is executing well, the company’s high stock valuation overall “keeps us sidelined.”

The revenue acceleration, improved product cycle and initiatives laid out during the company’s October-2017 Investor Day supporting digital, innovation and supply chain projects “paints a robust narrative and story to support” a higher multiple for Nike’s stock. But he said Nike’s P/E multiple has already expanded to 31x from 22x last year, while Cowen’s earnings targets have remained relatively unchanged.

Of the 72 mid- and large-cap companies in the Consumer Discretionary Index (XLY), only four–Under Armour, Tiffany, Carnival Cruise Lines and Chipotle–are more expensive than Nike on a free cash flow basis based on consensus estimates for the current year, he further noted. Nike even trades at a slight premium to Amazon on that same measure. Concluded Kernan, “At this valuation for Nike, we are willing to wait for a better entry point.”

Photo courtesy Nike