Nike Inc's NKE first-quarter financial results showed that a turnaround by incoming CEO Elliot Hill could take longer than expected and come with increasing challenges, according to analysts.
The Nike Analysts:
- RBC Capital analyst Piral Dadhania maintained a Sector Perform rating and lowered the price target from $85 to $82.
- Truist analyst Joseph Civello maintained a Hold rating and lowered the price target from $85 to $83.
- Morgan Stanley analyst Alex Straton maintained an Equal-Weight rating with a price target of $82.
- Stifel analyst Jim Duffy maintained a Hold rating with a price target of $79.
- Oppenheimer analyst Brian Nagel maintained an Outperform rating with a price target of $120.
RBC Capital: With a new CEO at the helm, Dadhania said Nike's "product pivot will take time" in a new investor note.
The analyst lowered revenue and earnings per share estimates with soft traffic and unit sales reported in the first quarter.
"The market likely looks through some of the near term earnings headwinds, with focus on the new CEO strategy, improving product offer and Performance focus," Dadhania said.
Nike's new products are performing well and an acceleration is expected in the Running category, the analyst added.
Truist: New CEO Elliot Hill taking over could present a "long/uncertain path" for Nike, Civello cautioned in a new investor note.
"With another miss vs. depressed expectations, Nike's visibility into its own business appears lower than we previously anticipated, which adds an incremental layer of difficulty to an already-tough task for incoming CEO Elliot Hill," Civello said.
The analyst said the new CEO change could push out optimistic expectations for a turnaround by Spring 2026 that bulls had been expecting.
Competition from On Holding ONON and Deckers Outdoor DECK, which owns HOKA could continue to hurt Nike, the analyst cautioned.
Civello said optimistic expectations that Hill can improve Nike's wholesale business will prove tougher as Nike's brand continues to "fade faster" and Nike's leverage with retail partners has shrunk.
Nike holds a dominant share position. However, the marketplace is “a lot more competitive than it was during Mr. Hill's prior tenure with Nike,” Civello adds. It remains to be seen if Civello can be “as effective given these new dynamics."
Morgan Stanley: First quarter earnings from Nike provided more for the bears than for the bulls, Straton said.
A worse-than-expected Q2 outlook and withdrawn fiscal-year guide overshadowed the headline Q1 beat, Straton said.
Weaker demand, rising inventory levels and risks of more promotional activity could give bears more to lean on, the analyst added.
"The stock likely proves range-bound while outstanding debates linger."
With Nike postponing its Investor Day and a new CEO coming into the mix, Straton said the company's strategy is "still not entirely clear."
Stifel: Declines in North America, EMEA and digital segments show Nike's market share losses, Duffy said.
"We agree with management comments that ‘a comeback of this scale takes time,'" Duffy said.
The analyst said recent stock activity shows that investors may have been betting on more of a near-term comeback for Nike.
"With a new CEO assuming the role in two weeks, we expect a return to growth sufficient to justify the high-twenties forward P/E multiple unlikely until 1HCY26 at the earliest."
Duffy said Nike remains the number one athletic brand and has a history of innovation and scale advantages.
"Lofty market share, increasingly credible competition, and recent footwear share losses, however, are resulting in revenue declines and margin pressure."
Oppenheimer: New product innovations were a key highlight for Nike in the quarter, Nagel said.
The analyst said Nike's new product innovations saw double-digit revenue growth in the quarter.
"Senior leadership remains optimistic around the product pipeline in running footwear and apparel, and announced plans for new running franchises priced below $100, allowing the brand to be more accessible to lower price-point consumers," Nagel said.
Nagel said Nike withdrawing fiscal 2025 guidance is likely done with the intention of clearing the deck for the new CEO as the company works on a "more aggressive turnaround effort."
Price Action: Nike stock is down 5.73% to $84.05 on Wednesday versus a 52-week trading range of $70.75 to $123.39. Nike stock is down 23% year-to-date in 2024.
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