Analyst: Nike's Capacity To Surprise Investors On The Upside 'Not As Substantial Anymore'

Not everyone is so bullish on Nike Inc NKE following its first-quarter earnings beat.

The Analyst

HSBC's Erwan Rambourg downgraded Nike from Buy to Hold and maintained a $92 price target.

The Thesis

Even though Nike delivered results ahead of consensus expectations, management didn't raise guidance. Rambourg said this was likely due to timing elements favoring the first quarter and currency having turned somewhat unfavorable. Nike shares fell immediately after the earnings release.

Rambourg is still convinced Nike will deliver ahead of sell-side expectations in the second quarter, but the market is now pricing in a lot of positivity. HSBC’s estimates are 4 percent to 5 percent above consensus on EBIT, respectively, for this year and next year.

Nike shares at a multi-year high relative to its global peers, at a forward PE of 30 times. While the analyst feels that's justified, he also says the capacity to surprise investors on the upside isn't as substantial anymore.

“We still have some upside linked to higher margin estimates notably than consensus but not enough to keep a Buy rating,” Rambourg wrote in a note. He sees an "absence of catalysts to further drive shares."

Price Action

Nike traded around $82.53 per share at time of publication.

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