Argus Research Downgrades Nike due to Rising Competition
Argus Research downgrades Nike to “hold”
Argus Research downgraded Nike (NKE) on April 4, 2017, to a “hold” from a “buy” rating. The brokerage firm cited increasing competition from Under Armour (UAA) and Adidas (ADDYY) as the key catalyst behind the downgrade.
Analyst John Staszak noted, “We expect Nike’s revenue and EPS growth to slow over the next 12 months, driven by competition from Adidas and HOLD-rated Under Armour (UA). We see Nike’s current P/E multiple increasing modestly over the next several quarters given high international inventories amid decelerating revenue growth in Europe and China. If Nike is able to sustain or improve current revenue trends, or improve futures orders significantly, we would consider an upgrade.” Nike’s stock price dropped 0.9% to $55.04 on April 4.
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Nike’s first downgrade after 3Q17 results
The Argus Research downgrade was the first downgrade that the company faced after it released its 3Q results on March 23. Nike’s earnings per share rose 24% YoY (year-over-year) to 68 cents, beating the consensus by a margin of 15 cents. Total sales rose 5% YoY to $8.4 billion, missing the consensus by around $30 million.
Wall Street recommendations
Nike, which is covered by 35 Wall Street analysts, has received a “buy” recommendation from 60% of the analysts and a hold recommendation from 37% of analysts. With only 3% “sell” recommendations, Wall Street seems to prefer Nike over Under Armour, Columbia Sportswear (COLM), and Lululemon Athletica (LULU), which have received 18%, 5%, and 9% “sell” ratings, respectively.
Average target price
Nike is currently trading ~10% below its 52-week high price. Wall Street, on average, expects the company’s stock price to touch $62.36, indicating an upside of ~13% over the next 12 months. Individual target prices for the company range between $46 to $100.
Founded in 1968, NIKE is the world’s largest athletic footwear and apparel company. The company derives around 60% of its sales from footwear products. Its products are sold in over 190 countries.
The company has a market capitalization of $91.1 billion as of April 4, 2017, and forms part of the S&P 500 Index and the 30-stock Dow Jones Industrial Average Index. It constitutes 3.4% of the US Consumer Goods ETF (IYK).