Wall Street Reacts To Nike's First Earnings Miss In 7 Years

Nike Inc NKE is coming off a surprise fourth-quarter earnings miss Thursday; here's how Wall Street is reacting. 

BofA: Just Don't Do It

Bank of America Merill Lynch analyst Robert Ohmes was particularly bearish on Nike, lowering his earnings estimates for the first quarter of 2020 from 77 cents per share to 72 cents per share on currency headwinds.

“Nike is now lapping the return of difficult global wholesale comparisons against the F19 ship-in of Air Max 270 & Epic React as well as the impressive ~25% FX-neutral avg. growth in Greater China over the last five quarters,” the analyst said. 

BofA reiterated an Underperform rating with a $70 price target.

Nike A Top Pick At Morgan Stanley

Morgan Stanley analyst Lauren Cassel has an opposite stance and said Nike remains her top pick.

Nike shared many remarkable fiscal 2019 stats that highlight the impressive digital transformation the apparel maker is undergoing, the analyst said. 

“On a constant currency basis, Nike added $4 billion of incremental revenues in FY19 alone. For perspective, that is more than Lululemon athletica inc. LULU entire business - in one year." 

Nike’s direct-to-consumer business drove 50% of this incremental revenue growth, and digital sales grew 35% year-over-year to $3.8 billion, Cassel said. The SNKRS app now represents 20% of Nike’s digital business, with $750 million in revenue, she said. 

Nike’s first-quarter growth could be slightly slower due to the timing of innovation, as the brand is releasing Joy Ride, a new personalized cushioning running platform, at the end of the quarter according to Morgan Stanley.

Morgan Stanley maintained an Overweight rating on Nike with a $103 price target. 

Edward Jones: Emerging Markets Key

Edward Jones analyst Brian Yarbrough said he believes the majority of future growth in global consumer spending will occur in emerging economies — a good sign for Nike, which generated 55% of sales outside of the U.S.

One-quarter of Nike's sales are coming from the rapidly growing economies of China, India and Brazil, the analyst said. 

“In many markets outside the U.S., the company has much lower penetration rates than the U.S. market, which offers the company long term growth opportunities."

Edward Jones believes the majority of the future growth in global consumer spending will occur in emerging economies, and the trend should drive Nike's growth in light of its strong presence and brand awareness, Yarbrough said. 

Edward Jones maintained a Hold rating on Nike. 

Price Action

Nike shares were trading slightly higher at $83.74 at the time of publication Friday. 

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Photo courtesy of Nike.