Jefferies Previews Nike's Q4 Results, Maintains Buy

Jefferies’ Edward Plank believes the correction in Nike Inc NKE shares “reflects the NT pressure points, and now presents an even more attractive buying opportunity as the PE multiple has contracted to below 3-year avgs.”

Plank reiterated a Buy rating on the company, while lowering the price target from $74 to $67.

In-Line F4Q

The analyst expects Nike to report in line results for F4Q on June 28, while mentioning that the larger focus would be on management's comments and updates on the outlook for FY17, especially given the increased competitive fears in the market, pressure in the high-end basketball segment, potential ASPs and futures risk and an inventory overhand in North America.

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However, Plank believes the stock is a top long-term holding in the athletic space and continued to list Nike as Jefferies’ top long-term pick.

Plank expects the company to report its EPS for F4Q in line with the consensus at $0.48.

Looking Ahead

“We don’t have a differentiated view here, given the already known margin pressure from N. America inventory liquidation and higher marketing spend around the NBA playoffs, Euro Cup and Olympics,” Plank stated.

For FY17, Plank expects Nike to face several near-term headwinds to its U.S. business, especially with the company ramping up demand creation expense ahead of the Olympics.

“But we view these headwinds as transient. Negative sentiment has gotten the better of NKE, but now seemingly overlooks the very real robust LT growth story,” the analyst said.