Nike’s (NKE) Q1 earnings beat was overshadowed by a disappointing Q2 outlook and the withdrawal of full-year guidance, Morgan Stanley said in a Wednesday note.
“Decent [Q1] headline overshadowed by downbeat tone & forward outlook, in our view leaving bears with more to point to than bulls exiting 1Q,” Morgan Stanley said, adding that “FY guidance withdrawal & postponed Investor Day, in our view, highlight limited visibility & ongoing strategy uncertainty.”
Morgan Stanley said recent developments reinforce its equal-weight thesis and suggest “a range-bound stock for some time.”
While Nike beat Q1 earnings per share expectations at $0.70, challenges like weak retail sales and excess inventory led to a projected 8% to 10% year-over-year sales decline and an implied EPS of about $0.63 for Q2, below Street estimates, Morgan Stanley said.
The Wall Street firm now projects fiscal 2025 EPS at $2.60, down from the previous $2.77, mainly due to a revised forecast for lower sales and gross margins, the note said.
Morgan Stanley maintained an equalweight rating on Nike with an unchanged price target of $82.
Shares of Nike were down more than 5% in recent Wednesday trading.