Brean Lowers Nike's Price Target To $62

Brean Capital analysts Eric Tracy and Benjamin Osborn lowered their price target on Nike Inc NKE shares to $62 from $68 following the company's fourth-quarter results, citing re-setting of North America, gross margin levers and focus on International that lead to tweaking of estimations. However, the brokerage maintains its rating of Buy on the shares of the company.

The two analysts think there is a possibility revenue and future growth from North America could decelerate against tough comparisons for several years. They also believe there is heightened risk, which led to the slash of their price objective.

Related Link: Nike's Q4 Earnings: Despite Growth, Currency Headwinds Remain An Issue

Regarding revenue growth, Brean Capital said that they got half of what they were looking. In other words, "NA revs/futures growth decelerated (flat/+6 percent y/y vs. +13 percent/+10 percent in 3Q)." Referring to the guidance for fiscal year 2017, the two analysts think Brexit risk is real, and that it implies acceleration in the second half of the fiscal year 2017. However, the brokerage believes that the guidance is achievable.

But, that is subject to continued outperformance in the International segment, especially China and Western Europe, apart from the likely acceleration in emerging markets. However, there is a threat of forex headwinds playing a spoil sport.

"Longer term, we believe continued focus on innovation (including Nike+ app, goes live in June) should continue to drive separation in the market, with a refocused ADS (launched biggest ever U.S. ad campaign in Feb.) and burgeoning UA (UA $37.52, Hold -Curry2, UA Record app) likely spurring NKE to push the innovation envelope even further, in our view," the two analysts concluded in their research note to their clients.

In the pre-market trading on Wednesday, the stock traded 2.3 percent higher to $54.31.