Upstart brands are presenting a formidable challenge to well-established athletic footwear giants such as Nike (NYSE:NKE) and Adidas (GB:0OLD)(ADDYY). According to a report from Reuters, emerging brands like On Holding (NYSE:ONON) and Hoka, owned by Decker Outdoors (NYSE:DECK), are securing increased retail shelf space due to the popularity of their eye-catching styles among consumers.
The report quoted Morningstar Research analyst David Swartz, saying Nike and Adidas are trailing in terms of innovation. Additionally, On’s market share in the footwear category at Dick’s Sporting (NYSE:DKS) has jumped from 0.8% at the beginning of the year to 6.1%. In comparison, Hoka experienced an increase from 4.2% to 8.7% during the same period. In contrast, Nike and Adidas have observed a consistent decline in market share.
While Nike and Adidas face heightened competition, let’s look at analysts’ consensus ratings for NKE and ADDY stocks.
What is the Future Outlook for Nike Stock?
Wall Street is cautiously optimistic about Nike stock. Analysts expect Nike to benefit from its improving inventory, new product introductions, focus on direct-to-consumer business, and structural improvements in supply chain and digital fulfillment costs. Further, its brand strength allows it to increase the average selling price, which will likely cushion its earnings.
Despite these positive aspects, Nike’s management acknowledges challenges in connecting with consumers through recent product innovations in the running shoes category. While Nike is addressing this issue, heightened competition remains a limiting factor.
With 18 Buy and 11 Hold recommendations, Nike stock has a Moderate Buy consensus rating. Further, the average NKE stock price target of $118.08 implies a 6.99% upside potential from current levels.
What is the Forecast for Adidas?
Adidas is struggling in North America as sales remain soft due to inventory-led issues. During the Q3 conference call, the company’s management highlighted that inventory levels in the U.S. are still an issue. This will likely weigh on its near-term revenue in the region. Moreover, heightened competition from upstart brands poses further challenges.
Similar to Nike, analysts are cautiously optimistic about Adidas stock. With two Buys and two Holds, Adidas stock has a Moderate Buy consensus rating. Further, the average ADDYY stock price target of $202.54 implies a 91.78% upside potential from current levels.
While Nike and Adidas continue to dominate the athletic footwear market, emerging brands pose a significant threat. Wall Street analysts are cautiously optimistic about Nike and Adidas stocks, suggesting investors should take caution before investing.