Robert Way
Nike (NYSE:NKE) fell sharply in early trading after sales and FQ1 guidance landed short of expectations. The report raised concerns with analysts about consumer demand in North America, the China recovery, macro factors, and the impact of competition. During the earnings call (transcript), Nike CEO John Donahoe said FY25 will be a transition year for the company and revenue is anticipated to fall at mid single-digit clip.
On Wall Street, J.P. Morgan downgraded Nike (NKE) to a Neutral rating after having the stock set at Overweight. “We see an elongated timeline for NKE to reaccelerate revenue growth in the midst of a franchise product lifecycle transition, with the global macro backdrop (notably headwinds in Greater China & EMEA) further complicating the path forward,” warned analyst Matthew Boss.
Stifel downgraded Nike (NKE) to a Hold rating from Buy and lowered its price target to $88 from $117. “Management credibility is severely challenged and the potential for C-level regime change adds further uncertainty,” said analyst Jim Duffy said. “We remain appreciative of NIKE’s scale advantage in a category with secular growth tailwinds and structural margin potential but, at the current valuation, can’t support a compelling upside case until growth inflection becomes more tangible,” he added.
Morgan Stanley cut Nike (NKE) to an Equal-weight rating from Overweight after pointing to the disappointing print and reduced outlook. “While undergoing strategic change, recent performance has been riddled with quarterly misses & guidance cuts,” noted Alex Straton. “We think this P&L volatility persists near-term, & NKE’s long-term growth & profitability trajectory is subsequently both unclear & lower than our prior assumption,” she added.
Meanwhile, UBS moved to a Hold rating on the athletic apparel stock. “Nike’s 4Q report indicated its fundamental trends are much worse than we realized. Our key conclusion is there will be no quick rebound for Nike’s earnings,” highlighted analyst Jay Sole.
Shares of Nike (NKE) were down 14.52% in premarket action to $80.51. The stock is down 35% from its 52-week high of $123.39.