Is Nike A Victim Of Its Own Success?

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Nike Inc (NYSE: NKE) shares were falling Friday despite reporting a strong third-quarter earnings beat on Thursday.

Morgan Stanley Analyst Lauren Cassel said that although expectations are high, Nike remains the firm’s top pick and recommends buying the dip, as the apparel maker’s direct-to-consumer sales are in the early innings.

The third quarter was the first $1-billion quarter for Nike Digital, Casell said, citing CEO Mark Parker. 

“Nike’s ability to scale innovation at an increasingly faster pace is a clear differentiator and [it] is one of the few consumer discretionary companies to benefit from the shift to e-commerce,” Cassel said in a Friday note. 

Morgan Stanley maintained an Overweight on Nike with a $103 price target. 

‘A Difficult Hurdle’ 

Wells Fargo analyst Tom Nikic called Nike a victim of its own success, but said there is still much to like about the company.

“Basically, the stock was trading at an all-time high multiple heading into the print and Street numbers were too optimistic — which made for a difficult hurdle for the stock,” the analyst said in a Thursday note. 

Wells Fargo maintained a Market Perform rating on the stock with a price target lifted from $76 to $80.

Nike Set To Gain Share From UA, Skechers?

Canaccord Genuity analyst Camilo Lyon said Nike’s core innovation pipeline is robust.

The company is amplifying its innovation in core footwear, which should enable it to gain market share from competitors — particularly Skechers USA Inc (NYSE: SKX) and Under Armour Inc (NYSE: UAA), the analyst said in a Friday note. 

Canaccord reiterated a Buy rating with a $96 price target.

UBS: Limited Multiple Expansion Ahead 

UBS analyst Jay Sole said Nike’s recovery is complete and is reflected in the stock price.

Sentiment is very bullish, and the stock’s 0.7-percent short interest indicates that positioning is also bullish, the analyst said in a Friday note. 

“We see limited multiple expansion potential from here because of these factors.”

UBS maintained a Neutral rating on Nike and lowered the price target from $87 to $86.

BofA Projects Higher Digital Marketing Costs 

Bank of America Merrill Lynch analyst Robert Ohmes took a markedly different stance on Nike.

Strong FY20 revenue growth may only partially offset an outlook for elevated expense pressures given Nike’s shift-to-digital, “as we continue to expect EBIT margin headwinds due to the rise in digital marketing costs (particularly paid search),” the analyst said in a Friday note. 

BofA maintained an Underperform rating with a $60 price objective.

Cowen: Nike Execution Is Flawless

Cowen analyst John Kernan said Nike’s execution is flawless, and high-single-digit sales growth and mid-teens EPS growth guidance suggests confidence in FY20.

“Nike’s Express Lane is an enabler of 2x speed and continues to scale and grow as a percentage of overall business,” the analyst said in a Friday note. 

Cowen maintained an Outperform rating and lowered the price target from $92 to $90.

Edward Jones: Shares Are Fairly Valued

Edward Jones analyst Brian Yarbrough said Nike holds an enviable position as the clear leader in the global athletic footwear and apparel market — but added that the shares are fairly valued.

“We are impressed with the solid sales gains across all of its markets as the company continues to take market share, but the company did experience a sales deceleration in every market.”

Edward Jones maintained a Hold rating on Nike 

Nike shares were down 5.75 percent at $82.95 at the time of publication Friday. 

Related Links:

What Broken Shoe? Nike Shares Rally, Brand Named Most Valuable After Zion Williamson Incident

Nike’s ‘Tanjun’ Was The Bestselling Shoe Of 2018; Mid-Market Footwear Dominates Top 10

Photo courtesy of Nike. 

Latest Ratings for NKE

Date Firm Action From To
Mar 2019 Wells Fargo Maintains Market Perform Market Perform
Mar 2019 UBS Maintains Neutral Neutral
Mar 2019 Nomura Maintains Buy Buy

View More Analyst Ratings for NKE
View the Latest Analyst Ratings

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One thought on “Is Nike A Victim Of Its Own Success?

  • No, Nike is not a victim of it’s own success. Nike did this to themselves. Many Police officers in this country will never buy Nike again, many Military personnel will never buy Nike again. I’m Cuban and have seen real oppression, and because the shirt Kap wore, I will never buy Nike again. Too many people will never buy Nike again. It was just a bad idea for Nike to select that guy as representative. He was just a bad example of someone who should have been grateful to have achieved such a level, and them lock the Police, kneel for the American Flag and and wear a shirt with fidel castro. Sorry Nike, I will never buy your products again.

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