Nike Inc NKE lost a Buy rating ahead of its fourth-quarter earnings report set for June 28.
The Analyst
Buckingham Research analyst Eric Tracy downgraded Nike from Buy to Neutral, but raised his price target from $75 to $80.
The Thesis
With shares up 18 percent year-to-date, Tracy now sees Nike as a more balanced risk-reward opportunity.
The analyst remains positive on Nike’s long-term fundamentals, but says inflationary pressures and organizational challenges "layer in some risks."
“We believe premium valuation/higher expectations largely reflect many of the positive fundamental view; thus we would look to get more constructive with our rating on either share pullback or better visibility to greater EPS upside catalysts,” Tracy said in a note.
Tracy expects Nike to show progress in North America on improving product, but it will be countered by a reset by Jordan.
The analyst also mentioned Puma’s PMMAF rapid ascension in the basketball footwear conversation is worth monitoring, but assured Nike’s large category position, of roughly 85-90 percent market share, affords Nike a large moat.
While Tracy believes Puma will do less than $100 million in revenue on basketball footwear, he did say Puma’s basketball push has the opportunity to infringe on Nike’s lifestyle category, “potentially impacting Jordan brand this in midst of a reset."
Price Action
Nike was trading relatively flat at time of publication around $73.67 per share.
Related Links:
Puma Takes Over NBA Draft Conversation With Basketball Footwear Push
Stifel: Nike 'Uniquely Positioned' In Shift To Direct-To-Consumer
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.