Friday, Nike (NYSE:NKE) The company had a rough day as its stock took a hit. The company’s iconic swoosh might as well have been replaced with a “phew” as the stock suffered its biggest single-day drop, falling 20% after disappointing fiscal fourth-quarter results (May quarter).
Although the revenue and profit figures were mixed, the real disappointment came in the company’s prospects. Macroeconomic challenges and continued weakness in China are driving a reduction in FY25 sales guidance. The sportswear giant now expects a single-digit revenue decline in the high of the range for the first half of fiscal 2025, compared to the low single-digit decline previously anticipated. Wall Street expected a decline of 2.3%. Additionally, Nike’s guidance for the first quarter of fiscal 2025 (ending in August) calls for a revenue decline of approximately 10%, significantly lower than analysts’ expectations of a 2.8% decline.
Not long ago, Oppenheimer’s Brian Nagel, an analyst ranked in the top 1% of Wall Street equity professionals, upgraded his rating on NKE. He cited “historically reduced stock valuations,” apparently pessimistic investor sentiment, and the mid- to long-term outlook for a fundamental recovery, based on management’s substantial “strategic repositioning efforts,” to justify his optimism. .
Have the latest results changed the 5-star analyst’s opinion? Not really. Although Nagel acknowledges that the results and updated guidance for FY25 turned out to be “even weaker than our pessimistic forecasts and below those of the stock market,” he still views the results and comments as “probably one last bad quarter and a healthy clearing event for NKE.”
“NKE is working to aggressively reposition the global business amid increasingly weak demand in the United States and markets around the world,” Nagel continued. “We continue to be hopeful that NKE’s efforts will help fuel an even stronger recovery for the business as cyclical pressures ease.” »
Overall, Nagel gives Nike an Outperform rating (i.e. Buy), with a $120 price target, suggesting shares will rally 59% over the coming year . (To view Nagel’s background, click here)
Most of Nagel’s colleagues are almost evenly split between bulls and skeptics. With 13 additional Buy, 15 Hold, and 2 Sell recommendations, the stock boasts a Moderate Buy consensus rating. At $96, the average price target takes into account one-year returns of approximately 27%. (See Nike Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the analyst featured. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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