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Citi analysts upgraded their recommendation on Nike (NYSE:) stock to Buy from Neutral with a price target raised by $35 to $135 per share.

The athletic apparel retailer is “an attractive margin recovery story in a choppy macro,” analysts wrote in a note.

Citi’s assessment of Nike highlights persisting top-line challenges while expressing increased optimism about the company’s capacity to safeguard earnings per share in fiscal years 2024 and 2025 amid a potentially uneven economic backdrop.

The optimism is rooted in several factors:

1) An anticipated gross margin recovery from the second quarter of fiscal year 2024 through fiscal year 2025;

2) The introduction of new innovations in calendar year 2024, strategically timed ahead of the Paris Olympics; and

3) Nike’s resilient position in China, despite ongoing macroeconomic volatility.

“Given the difficult comparisons in the NAM wholesale channel, challenging macro, challenging trends from NKE’s key retail partners in NAM and expected strong 2H sales recovery embedded in current guidance, we believe it is likely that mgmt will take a more conservative view toward 2H sales (and lower F24 sales guidance from +MSD to +LSD),” analysts said.

“However, we believe stronger GM/tight expense control will protect from an EPS reduction.”

Nike stock rose 1.8% while being down 1% year-to-date based on Friday’s closing price.

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