Nike's Stock Might Be A Better Idea In A Few Quarters

Nike Inc NKE will release its highly anticipated fourth-quarter earnings Thursday. Investors and analysts will be looking for some key commentary regarding the company's shift in strategy and recent Amazon.com, Inc. AMZN partnership following the news of its “reset” and layoff of 2 percent of its workforce announced earlier in the month.

"I think NKE earnings could be really interesting to see what they say their future of distribution is," TD Ameritrade's JJ Kinahan told Benzinga. "Dicks DKS] was a big distribution network for them. I think what they say will be of more interest than normal — and how they get their product to their clients. They also want to be careful not to tarnish the value of the brand in the meantime. Adidas [adidas AG (ADR) ADDYY] and UA UAA] sell directly to amazon now. They hadn’t now they're going to start."

Nike has found itself in an unfamiliar position, playing catchup. As Kinahan mentioned, the company needs to be careful not to tarnish the brand by putting a lot of its products on sale.

 

Nike is really grasping. Selling to Amazon & groupon now is a clear indication they r desperate. @NPDMattPowell have u seen Nike do this b4? pic.twitter.com/SJzoNlItuC

— Marcella Fredericks (@marcellaINC1) June 26, 2017

 

I have never seen Nike on sale as much as it is today. Very concerning

— Matt Powell (@NPDMattPowell) June 26, 2017

Analysts at Baird Equity Research believe Nike may be a better idea in one or two quarters from now.

“We are not aggressive buyers ahead of the FQ4 report, though we also are not making a negative short-term call, since the market already seems to be braced for soft FQ4 fundamentals and negative F2018 revisions.” said Baird analyst Jonathan R. Komp.

Baird maintains an Outperform rating on the stock, with a $62 price target. Komp believes Nike will have more flexibility following the restructuring and consumer direct offense strategy.

“Patience still likely required, though with NKE taking more aggressive actions to address underperformance, we think the path to improved fundamentals, greater confidence in estimates, and higher valuation is becoming more clear.”

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