One Analyst Didn't Like Nike's Results, Says Futures Are Becoming Irrelevant Predictors Of Growth

Canaccord Genuity’s Camilo Lyon maintained a Hold rating on Nike Inc NKE, while lowering the price target from $66 to $57.

Lyon mentioned that the company reported sales growth of 7.7 percent for FQ3, at the low end of the guidance and below the estimates and the consensus.

However, the EPS came in at $0.55, beating expectations, due to a lower tax rate, significantly lower than planned expense growth and flat gross margins.

“Despite the EPS beat, the softer sales growth is likely to weigh on the stock as it is the key metric (highest correlation) influencing stock performance,” Lyon pointed out.

Multiple Compression Expected

The analyst also stated that the stock is likely to see multiple compression, driven by the revenue miss during the quarter, as well as futures orders “becoming less of a predictor of reported sales.”

In addition, the North American inventory levels continued to be elevated. Lyon believes that this situation is being aggravated by the weakness in Nike’s signature basketball business.

The analyst also noted that increased competition was leading to market share losses for the company in retail.

“Taking it together, coupled with a premium valuation, we believe the stock will remain range-bound until sales beats can materialize,” Lyon added.

The analyst said they can't ignore the likelihood that increased competition from Under Armour Inc UA and Adidas ADDYY is resulting in share loss at retail.