Previewing Nike's Q4 Earnings: 3 Recent Developments Increase Concern

Seeing concerns ahead, Piper Jaffray analyst Erinn Murphy maintains her Neutral rating on Nike Inc. NKE with a $50 price target.

3 Recent Developments Create Concern

1. “We believe adidas AG (ADR) ADDYY's digital business growth eclipsed Nike's during the most recent quarter in dollar terms,” Murphy noted. According to Murphy, Adidas's current success is eroding Nike’s market share.
2. “We have yet to see meaningful enough innovation at scale from Nike to alter the near-term category narrative and note FL spoke to VaporMax as one of a dozen key platforms for them this year, not a make-or-break driver,” Murphy said.
3. Nike is beginning to offer less transparency to investors.

An Inflection Not As Near As It Seems?

Nike made a couple of strategic shifts last week including limiting its geographic reporting from six regions to four (offering less transparency), and management also cut 2 percent of its workforce. “While Nike has significant SG&A flexibility, to us this signals that sales likely fall below the company's long-term CC growth outlook,” Murphy said.

Related Links: Nike Says Futures Orders Don't Matter; Some Analysts Agrees 2 Hurdles Nike Needs To Clear