Analysts are becoming more cautious on sports apparel firm Nike (NKE) after its latest earnings report, with many saying that the turnaround could take longer than expected. More specifically, four-star Evercore ISI (EVR) analyst Michael Binetti warned that Nike’s strategy of slowly stabilizing profits may actually stretch out the recovery, instead of fixing things quickly. Therefore, he believes that investors may start to lose patience. This negative outlook comes as Nike’s stock continues to fall.
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Forget margin or options. Here's how the pros trade SPYIn fact, shares dropped 15.5% right after earnings and are now trading around $43, bringing the year-to-date decline to about 33%. Looking further back, the stock is down 68% over the past five years, while the S&P 500 (SPY) has gained 62% over the same period. As a result, Nike’s market value has fallen to roughly $65 billion, which is surprisingly low considering its global brand and large revenue base. It also doesn’t help that sales in China, one of Nike’s most important markets, fell by 10%, with digital sales down 21% and wholesale down 13%.
In addition, Nike expects fourth-quarter sales to decline by 2% to 4% and margins to drop. This led five-star Citi (C) analyst Paul Lejuez to estimate that earnings per share could come in between $0.05 and $0.15, below earlier expectations of around $0.20. Analysts as a whole have also lowered their forecasts to about $0.12, as Nike expects low-single-digit sales declines and flat earnings over the next nine months. Investors are now focused on the firm’s upcoming investor day, where management is expected to present a clearer turnaround plan.
Is NKE Stock a Good Buy?
Overall, analysts have a Moderate Buy consensus rating on NKE stock based on 15 Buys, nine Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average NKE price target of $62.58 per share implies 46.3% upside potential.
