Nike’s (NKE) fundamentals for Q3 are “lackluster,” but likely aligning with sell-side expectations, UBS said in a report emailed Tuesday.
“We don’t anticipate Nike changes its [fiscal year 2024] guidance or gives an initial view of FY25,” UBS said, adding that it doesn’t expect Nike’s report to change analysts estimates much.
“We see a balanced upside/downside skew over the event,” UBS said. The upside risk is Nike’s margins outperform expectations, while downside risk is if sales fall short of expectations and sentiment proves more bullish than anticipated by investors, it added.
According to UBS Quant Team’s crowding data, Nike is currently experiencing high levels of crowding, with a score of 27, which has risen notably in the past week. This score surpasses Nike’s five-year average of 19.2. “This matches what we hear in conversations with investors,” UBS said. “The market knows Nike has struggled recently, yet is looking at the stock as a long on the ‘exceptional company trading at a relative discount’ thesis,” it added.
Industry data indicate a sequential decline in global web traffic for Nike.com, while UBS Evidence Lab’s China Online Market Monitor suggests muted consumer spending in China, the report said. UBS forecast negative 0.7% Q3 sales growth and a 3 cent EPS beat on better-than expected promotion and delivery costs.
UBS maintained it buy rating on Nike, with an unchanged price target of $138, adding that Nike will likely outperform over the next 12 months.