Nike (NKE) received an investment rating downgrade on Friday to sector perform from outperform from RBC Capital Markets, which said the athletic footwear and apparel company’s latest guidance implies no revenue growth in 2024 and thus “leaves little to play for in the near term.”
RBC also lowered its price target on Nike’s stock to $100 per share from $110. The shares, which closed Thursday’s session at $100.82 each, fell 6.5% to $94.25 in recent Friday pre-market activity amid disappointment over the guidance.
After Thursday’s market close, Nike released better-than-expected results for its fiscal Q3 ended Feb. 29. However, on a conference call after the report, Chief Financial Officer Matthew Friend said Nike is “prudently planning” for sales to be down by “low single digits” for the first six months of the next fiscal year, according to a company transcript. Friend cited “near-term headwinds from lifecycle management of key product franchises” as well as “the subdued macro outlook around the world.”
The guidance was unexpected and “implies no revenue growth for [calendar-year] 2024, which leaves little to play for in the near term,” RBC analysts said in a Friday note to clients.
Organizational restructuring and product transition over the next few quarters “add further uncertainty and guidance risk in our view,” RBC’s analysts said. “We have no doubt Nike will emerge on the other side a better company in a better phase of its business cycle; however, for now we prefer to follow the momentum,” the analysts added, noting RBC sees stronger momentum at German rival adidas.
Nike has an average investment rating of outperform among analysts polled by Capital IQ, with price targets ranging from $75 to $142.