Nike Inc (NYSE:NKE) is a long-term outperformer according to analysts at UBS, who believe the athletic footwear, apparel, and equipment company’s upcoming quarterly earnings will be a negative catalyst.
The analysts projected that Nike’s 2024 financial year guidance is likely to fall short of expectations, pressuring the stock.
“We believe Nike's FY24 guidance will imply earnings per share (EPS) of $3.45 to $3.70,” they wrote in a note to clients.
“We expect this will disappoint the market since our conversations with investors suggest they believe the midpoint of Nike's implied EPS guidance will be $3.80. We anticipate this type of guide causes the market to revise its NKE earnings expectations lower.”
They noted that a likely slowdown in Nike’s US footwear business, evidence of increased promotions and the continued recovery of its China business, pointed to a soft FY24 guide.
“We continue to believe Nike has a strong long-term outlook, but we have less conviction in this view than we did three months ago,” the analysts wrote.
“Nike's investments in product innovation, supply chain speed and digital are unlocking what is likely a multi-year period of above-average growth. Plus, we believe Nike has the brand strength, strategy, skills, and resources to outperform peers through a potential recession.”
They awarded the stock a ‘Buy’ rating but lowered their price target by 6% to $145, based on about 30 times their 2025 financial year EPS estimate of $4.85.
Nike shares are currently trading at about $110.
The analysts noted that while sentiment around Nike has cooled recently, it is likely better than the market thinks based on the UBS Quant team’s crowding data.
“Nike’s ‘crowding score’ is still above the low end of its normal range. This suggests to us sentiment is not as poor as some believe,” they explained.
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