Nike 'still not out of the woods,' analyst says, as stock drops after earnings

By Steve Gelsi

Athletic-apparel company 'beat a low bar' with its earnings results, analyst says

Nike Inc.'s stock fell 5.7% on Wednesday after the athletic-apparel company's latest quarterly results disappointed investors.

Analysts at Jefferies, Truist, Sifel and J.P. Morgan were critical of the results, while Oppenheimer and BofA issued more upbeat comments.

Jefferies analyst Randal Konik said the company is "still not out of the woods" after hiring a new chief executive.

Nike's stock (NKE) dropped $5.13 to $84 a share on the heels of results that included stronger-than-expected earnings but revenue that fell short of estimates. Nike also cut its sales outlook for the year.

The stock was the worst performer among the 30 stocks in the Dow Jones Industrial Average DJIA on Wednesday.

Konik reiterated a hold rating on Nike and said the company's earnings of 70 cents a share "beat a low bar" estimate of 52 cents a share from Wall Street analysts.

It's not yet time to buy the stock, because it will take time for Elliott Hill, the incoming chief executive officer, to carry out changes at the company, Konik said.

"There are a lot of changes that need to take place, while we await CEO-elect Hill's strategic plans," Konik said in a research note published on Wednesday. "In the meantime market share losses are likely to continue ... and the consumer becomes more challenged."

Truist analyst Joseph Civello reiterated a hold rating on Nike and said the company's visibility into its business "appears lower than we previously anticipated, which adds an incremental layer of difficulty to an already-tough task for incoming CEO Elliott Hill."

While Nike bulls have been anticipating that turnaround plans will bear fruit in the spring 2026 fashion cycle, "that timeline may prove optimistic," Civello said.

Stifel analyst Jim Duffy stuck to his hold rating on Nike's stock and said the stock has benefitted from the expectation of a turnaround that may be further away that some think.

"We agree with management comments that "a comeback of this scale takes time," Duff said. "Recent stock action, however, seemingly speculatesotherwise."

J.P. Morgan analyst Matthew Boss reiterated a neutral rating on Nike and said the company faces "an elongated timeline" to "re-accelerate revenue growth in the midst of a franchise product lifecycle transition."

Nike faces headwinds in China as well Europe, the Middle East and Africa that are "further complicating" its path forward, he said.

"While we see continued annual gross margin expansion (strategic pricing benefits & lower product costs), [Nike] intends to continue to reinvest notably across demand creation to support new innovation as it scales in the marketplace & brand-building efforts," Boss said.

Oppenheimer analyst Brian Nagel was more upbeat. He reiterated an outperform rating for Nike and said management remains optimistic about the company's product pipeline.

"Nike wholesale partners are responding well to new product innovations and efforts on the part of Nike to elevate and differentiate the brand in retail, helping to drive double-digit revenue growth in new products in the quarter," Nagel said in a research note.

The company has launched a new running shoe priced under $100, which will "allow the brand to be more accessible to lower price-point consumers," Nagel said.

BofA analyst Lorraine Hutchinson reiterated a buy rating on Nike and said the company is in the midst of a "reset" ahead of Hill taking over as CEO starting later this month.

"We remain encouraged by [Nike's] plan to pull forward innovation (both performance and lifestyle) and the early signs of success it is seeing in key focus areas like running," Hutchinson said.

Prior to Wednesday's trading, Nike's stock has fallen 17.9% in 2024, compared with a 19.7% rise by the S&P 500 SPX.

-Steve Gelsi

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10-02-24 1140ET

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