Citi Sees Key Controversies Still Surrounding Nike Ahead Of Q1 Earnings

While there continue to be concerns around Nike Inc’s NKE Q1 earnings and the possibility of disappointing Q2 guidance, there is “more upside than downside” in the near term, Citi’s Kate McShane said in a report. She maintained a Buy rating on the company, with a price target of $61.

“Nike continues to be one of the most controversial names in apparel/footwear,” analyst McShane commented, explaining that the company’s stock was trading at a high valuation, while the global competitive landscape was changing.

Both global and North America futures decelerated in Q1, and Nike is facing increasing competition from adidas ADDYY and Under Armour Inc UA, among others. Nike is also witnessing challenges to signature basketball as well as higher reported inventory levels, McShane mentioned.

Upside Still Exists

Although there are concerns surrounding “the possibility of lower than expected guidance for Q2 and a further deceleration in futures” when Nike reports earnings on September 27, there could be “more upside than downside” in the near term.

The analyst enumerated the reasons as: “1) a likely bottoming of the signature basketball category, 2) what appears to be maintenance of global share in a growing category and 3) an interest from long only accounts to buy this stock in the low 50’s.”

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