Karishma Vanjani
Nike will unveil its report card for the most recent quarter this Thursday. There is uncertainty on Wall Street about what it will show.
Sam Poser of Williams Trading downgraded the shoe company’s stock to a Sell rating from Hold early Monday, forecasting that the stock will hit $85, which is 15% below its closing price on Friday.
“Nike is losing its luster” and management isn’t doing enough to make it shine, he wrote. The quarterly profits are likely to be lower than Wall Street expects, while the company is likely to cut its financial forecasts, Poser said.
While the consensus call on Wall Street is that earnings will be 75 cents a share for Nike’s third fiscal quarter, Poser expects 73 cents. Nike didn’t immediately respond to a request for comment.
Nike’s stock has lost more than 8% in value this year and has yet to rebound from a significant drop that came after the company reported its earnings in December. At the time, Nike said it expects sales to soften for the remainder of its fiscal year, which ends around May, as consumers become more cautious with their spending, especially in China and in Europe. Management said it expected revenue growth of 1%, down from the mid-single digits increase it had predicted.
The company has missed sales estimates for the past two quarters. Last month, it announced a plan to cut more than 1,600 jobs, or some 2% of its workforce, to free up money to invest in areas such as women’s apparel.
While investors should be cautious, it would be a mistake to entirely dismiss the possibility of a comeback.
Nike has a few things going for it. Nike debuted the Alphafly 3 “Prototype” in January this year, which sells for more than $250. The official version comes out on April 4. The shoe made headlines after 23-year-old Kelvin Kiptum wore it last year to set a record at the Chicago Marathon. The company also plans to launch Pegasus 41 this year, the latest in its line of running shoes.
Another boost could come from the Olympics in Paris this summer. The company has said it has big product plans tied to the event. “That’s when NIKE shines its best,” CEO John Donahoe said in December.
Guggenheim analyst Robert Drbul is upbeat. He reiterated a Buy rating and $130 target for the stock price last week, saying recent weakness in the shares is a buying opportunity.
“Management is laying the groundwork for many launches of product to deliver an acceleration in top line growth in the second half of 2024 and into 2025,” he wrote.
Nike’s stock was down 0.7% to $98.97 at the open on Monday. Barron’s named Nike as a stock pick in August.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com