Nike shares gained 3.3 percent in after-hours trading Monday evening after the footwear company reported fiscal second-quarter profits and sales that beat analysts' estimates despite ongoing supply-chain issues. The business earned $1.34 billion in the fiscal second quarter, or 83 cents per share, up from 78 cents a year earlier. Analysts had predicted a profit per share of 63 cents.

Revenue increased to $11.36 billion from $11.24 billion the year before, above the $11.25 billion forecasts. North America, Nike's (ticker: NKE) largest market, had a 12 percent increase in revenue, the highest of all geographies. The business stated in an earnings conference Monday evening that increased customer demand, particularly for online items, helped raise profitability. Nike's digital sales increased by 11% in the quarter, accounting for 25% of the company's overall revenue worldwide. Last quarter, Nike increased its investment in its mobile platform.

Despite the stock's recent gain, Trefis values Nike at $171 per share, a 4 percent premium to the current market price, based on two important prospects.

Nike's revenue growth is the first potential we identify. Revenue increased by 16 percent year over year to $12.2 billion. Strong demand supported the growth, notably in its direct and digital channels, where sales increased by 28% and 29%, respectively. In fact, digital sales increased even while traditional shop sales recovered from the epidemic.

Direct-to-consumer sales, on the other hand, tend to have larger gross margins and provide the corporation more control over the sales process. As a result, the company's total margins increased by 1.7 percentage points to 46.5 percent, resulting in a 22 percent increase in earnings per share to $1.16 in the first quarter. Nike also stated that more than 65 percent of its overall sales were made at full price, exceeding the company's own goal. By 2025, the corporation looks to be on track to generate 40% of its income from owned digital sales, according to the numbers.

Nike expects markdowns to be lower than average for the rest of fiscal 2022 due to supply chain restrictions. To account for some of the additional supply chain expenses, the firm plans to raise prices in the low single digits in the second half of the year.

Revenue decreases in China, as well as other areas of Asia, were "primarily attributable to decreased levels of available inventory resulting from COVID-19 related facility closures," according to the company's results announcement. Nike's inventory was up 7% year over year to $6.5 billion, according to the business. The firm has revealed challenges with producing its products in Vietnam, including factory closures due to a virus outbreak, as well as rising expenses for shipping items and paying workers. Nike stock has risen 10.6 percent this year, underperforming the S& P 500 index's 23 percent increase and the Dow Jones Industrial Average's 15.5 percent gain. One of Dow's 30 components is Nike.