Merrill Lynch upgraded Nike (NKE ) to buy from neutral.
Analyst Virginia Genereux says she thinks the Street's consensus estimates for Nike have substantial upside. She sees $3.50 earnings per share in fiscal 2004 (May) and $4.02 earnings per share in fiscal 2005, vs. the consensus of $3.25 and $3.70, respectively.
Genereux thinks the upside can drive the stock to market multiple or slightly ahead. Nike currently is trading at 19.4 times the consensus forward estimates (for the next four quarters), so her $76 price objective doesn't call for any multiple expansion.
Also, Genereux says the key contributors to an earnings surprise are Nike's ability to expand operating gross margin and benefit from the impact of foreign currencies.