This morning, Goldman Sachs analyst Lindsay Drucker Mann downgraded Nike (NKE) to Neutral as she expects shares to trade in a range as the company works through excess inventory in the U.S. Further, the analyst believes Nike’s upcoming investor day is unlikely to be a positive catalyst, an opinion shared by her peer at Citi, who also sees it as likely to be a neutral event.
MOVING TO THE SIDELINES: In a research note to investors this morning, Goldman Sachs’ Mann downgraded Nike to Neutral from Buy, with an unchanged price target of $54. The analyst expects shares to trade in a range as Nike works through excess inventory in the U.S. While the underpinnings of the company’s business remain compelling, driven by an opportunity to further consolidate market share in the growing athletic apparel and footwear market, near-term dynamics are challenging with an inventory overhang in the U.S. hampering Nike’s ability to “reset” the market, she noted. Additionally, Mann believes that beyond the company’s domestic overhang, there are incremental signs of weakness emerging overseas, where it generates around half of sales. The analyst also pointed out that she views next week’s investor day as an opportunity for management to lower its multiyear growth targets, which look stretched in the face of industry headwinds. While this event may not be an explicit negative catalyst, it is unlikely to be a positive event, she contended.
INVESTOR DAY LIKELY ‘NEUTRAL’: Earlier this week, Citi analyst Kate McShane had also told investors that she believes Nike’s investor day on October 25 will likely be a neutral event for the shares. The analyst argued that the company’s previous long-term target of $50B in revenue by fiscal year 2020 is at risk. While she expects long-term targets to be pushed out, this reduction seems likely anticipated. Additionally, McShane noted that Nike shares are down 15% off of year-highs amid ongoing concerns around a slowdown in North America and improved momentum from competitor adidas (ADDYY). She reiterated a Buy rating and a $65 price target on Nike’s shares.
