Nike Receives Downgrade Ahead Of Q4 Print; Analyst Says 'Puma Hoops Worth Monitoring'

Nike Inc NKE lost a Buy rating ahead of its fourth-quarter earnings report set for June 28.

The Analyst

Buckingham Research analyst Eric Tracy downgraded Nike from Buy to Neutral, but raised his price target from $75 to $80.

The Thesis

With shares up 18 percent year-to-date, Tracy now sees Nike as a more balanced risk-reward opportunity.

The analyst remains positive on Nike’s long-term fundamentals, but says inflationary pressures and organizational challenges "layer in some risks."

“We believe premium valuation/higher expectations largely reflect many of the positive fundamental view; thus we would look to get more constructive with our rating on either share pullback or better visibility to greater EPS upside catalysts,” Tracy said in a note.

Tracy expects Nike to show progress in North America on improving product, but it will be countered by a reset by Jordan.

The analyst also mentioned Puma’s PMMAF rapid ascension in the basketball footwear conversation is worth monitoring, but assured Nike’s large category position, of roughly 85-90 percent market share, affords Nike a large moat.

While Tracy believes Puma will do less than $100 million in revenue on basketball footwear, he did say Puma’s basketball push has the opportunity to infringe on Nike’s lifestyle category, “potentially impacting Jordan brand this in midst of a reset."