Wall Street always tries to stay alert to changes in a company's fundamental performance, so it wasn't surprising that analysts quickly reversed gear on Nike (NKE) after it posted disappointing results for its fiscal first quarter. 

The report caused the stock to stumble to $94 a share on Sept. 28, down from $96 the day before and $100 on Sept. 12. Nike's earnings fell to $1.23 a share from $1.36 a year ago, as lower gross margins, higher expenditures and a higher tax rate offset a 10% jump in revenue.    

But Nike remains a sprinter and is expected to exceed its five-week high of $114, according to investors who look at the long-term growth prospects of the leading maker of athletic footwear, apparel and accessories.

"We believe Nike has a cohesive plan and is on track to reach $28 billion to $30 billion in revenue by fiscal 2015, with mid-teens EPS growth," says Robert S. Drbul, analyst at Barclays Capital. Recommending the stock as "overweight," he expects long-term gross margin expansion through cost initiatives, logistics, and direct-to-consumer efforts.

"Nike has the global reach and scale to navigate a difficult sourcing environment," says Drbul, who has a 12-month price target of $115 a share. Citing the first-quarter results and his expectation that Nike will do a $2 billion share repurchase, he raised his earnings for fiscal 2013 to $5.35 a share from $5.17, and his fiscal 2014 forecast to $6 from $5.90.

He notes that revenue from North America continued to grow at an impressive pace -- up 23%. Sales in emerging markets grew 8.4% (or 22% in constant dollars), with China rising 8.3%.

China is a market that concerns the bears, who point to too much inventory, high discounting, and slowing demand in the country. Camilo Lyon, analyst at  Canaccord/Genuity, a global capital markets unit of Canaccord Financial, rates Nike a "hold" because of the excess inventory and discounting in China. Although Nike holds a "strong leadership position in the country," Lyon believes it is "overshadowed by macro pressures and highly promotional competitive landscape."   

But Barclays' Drbul thinks Nike is very well aware of what's happening in China. "We view the 5% decline in China futures as aligned with Nike's plans to work with retailers to resolve the industry-wide issue of excess inventories," he says. Despite near-term pressures, Nike is working to tailor products to the Chinese consumer. "We expect the region to drive long-term growth," says Drbul.

The upside case for Nike, according to the analyst, is an estimated 20% earnings growth, based on additional top-line growth and gross margin recovery -- assuming no consumer resistance to price increases.

Also a bull on Nike is Jim Duffy of investment firm Stifel Nicolaus. He rates the stock a "buy," noting that the first-quarter results were a "solid start to fiscal 2013" and that the "futures numbers show the brand with good momentum in markets representing 90% of Nike's global revenue."

While Duffy concedes that the results in China did not meet expectations, and that slower growth in the country is holding back the company's 2013 earnings power, he believes Nike's quick repositioning to drive future growth is "appropriate" and should work.

Duffy says that while there is much focus on the slowdown in China, "it's important to keep perspective," pointing out that China represents only 10% of revenue. "We believe the problems in China can be fixed," he says, and "we continue to see Nike as a solid core holding."

Gene Marcial wrote the column “Inside Wall Street” for Business Week for 28 years and now writes for MSN Money’s Top Stocks. He also wrote the book "Seven Commandments of Stock Investing," published by FT Press.

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