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Piper Jaffray Downgrades Nike to ‘Neutral’

Gabriel Kane - Author

Sep. 12 2016, Updated 2:30 p.m. ET

Price movement

Nike (NKE) has a market cap of $95.1 billion. It fell by 2.7% to close at $56.17 per share on September 8, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.3%, 1.0%, and -9.4%, respectively, on the same day. NKE is trading 2.7% below its 20-day moving average, 1.0% below its 50-day moving average, and 4.5% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Growth ETF (IWY) invests 1.2% of its holdings in Nike. The ETF tracks an index of US large-cap growth stocks selected from 200 of the largest US companies by market cap. The YTD price movement of IWY was 4.6% on September 8.

The market caps of Nike’s competitors are as follows:

  • VF Corporation (VFC) — $25.5 billion
  • Under Armour (UA) —$16.8 billion
  • Skechers USA (SKX) — $3.8 billion

Nike’s rating

Piper Jaffray has downgraded Nike’s rating to “neutral” from “overweight” and set the stock price target at $58 per share.

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Performance of Nike in fiscal 4Q16 

Nike reported fiscal 4Q16 revenues of $8.2 billion, a rise of 5.1% from the $7.8 billion reported in fiscal 4Q15. Revenues of its footwear and apparel brands rose by 6.3% and 3.9%, respectively. Revenues from equipment fell by 5.8% between fiscals 4Q15 and 4Q16. Revenues from Western Europe, Greater China, and Japan rose by 18.5%, 18.1%, and 21.7%, respectively. Revenues from Central and Eastern Europe and emerging markets fell by 4.2% and 6.6%, respectively, between fiscals 4Q15 and 4Q16.

Nike’s net income fell to $846.0 million in fiscal 4Q16, compared with $865.0 million in fiscal 4Q15. It reported EPS (earnings per share) of $0.49 for fiscal 4Q15 and fiscal 4Q16. In fiscal 4Q16, the company repurchased a total of 9.0 million shares worth ~$540 million under the share repurchase program of $12 billion approved by the board of directors in November 2015.

Fiscal 2016 results

In fiscal 2016, Nike reported revenue of $32.4 billion, a rise of 5.9% year-over-year. The company’s gross profit margin rose by 0.43% in fiscal 2016. Its net income and EPS rose to $3.8 billion and $2.2, respectively, in fiscal 2016, compared with $3.3 billion and $1.85, respectively, in fiscal 2015.

Nike’s cash and cash equivalents fell by 18.5% and its inventories rose by 11.6% in fiscal 2016. Its current ratio and debt-to-equity ratio rose to 2.8x and 0.75x, respectively, in fiscal 2016, compared with 2.5x and 0.7x in fiscal 2015. In fiscal 2016, the company repurchased a total of 55.4 million shares worth ~$3.2 billion at an average price of $58.44 under the old and new share repurchase programs of $8 billion and $12 billion, respectively.

As of May 31, 2016, Nike scheduled the delivery of $14.9 billion in orders from June to November 2016. This translates to a rise of 8% in orders from the previous year and a rise of 11% on a currency-neutral basis. Next, we’ll discuss Crown Holdings (CCK).


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