Nike (NYSE:NKE) has yet to dial in its latest quarterly statement, but one top Street analyst has already delivered his verdict on the sportswear giant, and it is not one investors will be happy with.
Williams Trading’s Sam Poser, an analyst ranked in the top 3% of Street stock pros, thinks Nike is “losing its luster” and not doing nearly enough to improve its positioning, believing the swish machine’s strength “continues to diminish.”
“The diminishing strength comes from the facts, as we assess them,” says the 5-star analyst. “Nike is no longer as ‘relentlessly self-critical’ as it was in its heyday. Today, it appears as if consultants, rather than Nike experts are leading strategy decisions, senior leaders are too dogmatic, and do not welcome all opinions. Financial goals are leading merchandising decisions, and many of those driving the direction of the company are using spreadsheet, rather than the educated gut, with strict parameters that led Nike to become a $50B company.”
That’s a damning assessment and comes ahead of the company’s fiscal Q3 earnings, which Poser expects will feature a “slight miss, and FY24 guidance will be cut once again.”
The issues mentioned above present both immediate and “long term challenges” to growing sales and margins. These are becoming evident in several ways. First, through underperforming new shoe releases. Secondly, by rushing products like Nike Running & Nike Basketball into the market, the company is prioritizing “sales growth over brand equity,” instead of bolstering the “pull model” that has been crucial for the development and resilience over the long-term of the Nike & Jordan brands. There are also insufficient new products capable of effective commercialization. Lastly, hubris has set in with Poser claiming there is “likely overconfidence” new styles such as the upcoming AirMax DN, will be greeted with enthusiasm.
“NKE is not deserved of its historic multiple,” says Poser, who as a result has downgraded his rating from Hold (i.e., Neutral) to Sell, while slashing his price target from $92 to $85. The new figure implies shares have downside of ~15% from current levels. (To watch Poser’s track record, click here)
Poser, though, is alone in his bearish NKE stance. Elsewhere, the stock claims 18 Buys and 9 Holds, all coalescing to a Moderate Buy consensus rating. The average target also remains a decent one; at $121.59, the figure makes room for one-year returns of ~22%. (See Nike stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
