Shares of the world's most popular athleticwear brand, Nike (NKE 4.82%), were up 5% as of noon ET Monday, according to data provided by S&P Global Market Intelligence.

The increase is due to investment firm Jeffries raising its price target on the company to $115 per share, a 46% increase from its current price.

Nike is running it back

Nike's stock cratered 55% from its highs after the company alienated many of its product distribution partners over the last few years. Seeing initial success from its in-house Nike Direct and Nike Digital operations, the company leaned into its own sales capabilities in favor of maintaining relationships with its wholesale partners.

However, as customers shifted from pandemic-aided shopping at home to going back to stores as things normalized, Nike's sales declined for the first time since the start of the pandemic itself.

Cue a new CEO in Elliott Hill for Nike, and Jeffries analyst Randal Konik now believes the company's risk-reward profile is attractive. With Hill focused on restoring Nike's distribution relationships and getting back to its innovative roots, Konik thinks the stock is currently at its "valuation trough" at 25 times earnings.

Citing recent surveys showing Nike's brand remains strong and an increase in job postings for product positions on the company's website, Konik thinks the market is underestimating Nike's turnaround story.

Furthermore, a separate fall 2024 Piper Sandler study of teen shoppers showed that Nike's brand remains best in class. Nike was the favorite footwear and clothing brand among 57% and 33% of teens, respectively -- both of which were six times larger than the next competitor.

Looking ahead

Though Nike's turnaround requires patience from investors, its popularity with young shoppers points to a bright future if Nike's new management can execute.

Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group and Nike. The Motley Fool has a disclosure policy.

positions articles