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Nike to exceed expectations throughout 2019: analyst

  • Wedbush reiterates its outperform rating on Nike and raises its target to $82.
  • Firm predicts growth will continue to accelerate, particularly in North America.
  • "Halftime Report" trader Jim Lebenthal believes the stock is "rich" at these levels, and it might soon be time to take profits.

Nike shares are already up nearly twenty percent this year, and one analyst believes the stock's run is just getting started.

On Thursday Wedbush analyst Christopher Svezia raised his target on the stock to $82 (up from $75) based on long-term growth potential. Nike closed at $74.11 on Wednesday, so Svezia's new target represents a 10.65% upside from current levels.

"[T]he company should be poised to exceed expectations throughout FY19 given accelerating growth in NA, possibly international, and gross margin tailwinds," Svezia wrote in a note to clients. "Our estimates remain ahead of consensus for the 4Q18 and FY19...Progress in NA around product and speed can also augment the sales opportunity in international markets as well."

Nike reports Q4 earnings on June 28th. Analysts are expecting EPS of $0.64 on $9.81B in revenue, according to estimates from FactSet. One key metric analysts will be watching is revenue from North America. The bulk of Nike's sales come from the region -- 39.7%, according to FactSet -- so it's a key indicator of company momentum. Last quarter revenue from North America came up short -- $3.57B versus analyst expectations of $3.67B.

But Svezia believes the tide may now be turning. "We are bullish on NKE given our increased confidence in an inflection in margin and a return to growth in North America in FY19," he wrote.

Not everyone, however, believes now is the time to get in the game and buy Nike.

Jim Lebenthal, partner at HPM Partners and "Halftime Report" trader, believes the stock is expensive at current levels and that a future pullback could be a more attractive entry point. But he also noted that for investors who already own the stock it's not time to sell just yet.

"This has obviously been a great stock over the last year. And you should continue to ride it as long as the chart trends up. But when it rolls over, and it eventually will, you have to consider that it's trading in the high 20s as far as a forward earnings multiple, which is rich for this stock," he said to CNBC.

Nike currently trades at 27.5 times next year's earnings, compared to 25X at the beginning of the year. The stock hit an all-time high of $75.91 last Thursday, and it has been trading around that level since.

For investors looking to take profits in the name, Lebenthal suggests watching the charts to identify a coming downtrend.

"It's going to keep going until it rolls over, but when it rolls over, which may be now, it may be $82, it may be past $82, that's the time to get out of it. So this is a stock where you look at the chart because it's already past its sell point...if you want to ride it until the very end, that's fine, but wait for 2 or 3 down days in a row to get out of it," he added.