Just Not Doing It: Look For Nike Shares To Trade Range Bound Ahead Of Investor Day

Nike Inc NKE has been downgraded by Goldman Sachs from a Buy rating to a Neutral one ahead of the company’s investor day on Oct. 25.

Goldman Sachs analyst Lindsay Drucker Mann expects Nike shares to trade in a range as the company works through excess inventory in the U.S.

Mann said Nike’s investor day is unlikely to be a positive event. The event, however, will be an opportunity for management to lower its multiyear growth targets, “which look stretched in the face of industry headwinds,” said Mann.

Although Nike’s long-term business remains compelling, its inventory glut is weighing on shares, making it difficult for the company to reset the market.

Nike is committed to clearing out excess product to create a healthy “pull market,” an effect that it has lost over the past few years. Nike is currently in the midst of a push market, with inventory on sale like never seen before. The discounting could ultimately have a material effect on the brand’s status as a premium brand.

Goldman Sachs did note that adidas AG (ADR) ADDYY rise has been a challenge for Nike but does not undermine Nike’s capabilities to create innovative products that competitors find difficult to replicate.

The firm also acknowledged that Under Armour Inc UAA threat to Nike in basketball with Steph Curry has been “largely diffused, after a strong initial launch has transition to more tepid sales,” concluded the analyst.

Goldman Sachs maintains a $54 price target on Nike.

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