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Cowen Downgrades Nike to ‘Neutral’

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Price movement

Nike (NKE) has a market cap of $84.5 billion. It fell 2.5% to close at $50.57 per share on December 6, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.24%, 1.6%, and -18.1%, respectively, on the same day.

NKE is trading 0.39% below its 20-day moving average, 1.4% below its 50-day moving average, and 9.3% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Growth ETF (IWY) invests 0.98% of its holdings in Nike. The YTD price movement of IWY was 3.8% on December 6.

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

  • F. Corporation (VFC): $23.4 billion
  • Under Armour (UA): $12.6 billion
  • Skechers USA (SKX): $4.2 billion

Nike’s rating

On December 6, 2016, Cowen downgraded Nike’s rating to “neutral” from “outperform.” It also reduced the stock’s price target to $54.0 from $59.0 per share.

TheStreet reported, “Cowen says that headwinds from Adidas (ADDYY) and Under Armour (UA) will ramp up against Nike in its battle to preserve market share from its two rivals.”

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Performance of Nike in fiscal 1Q17

Nike (NKE) reported fiscal 1Q17 revenues of $9.1 billion, a rise of 8.3% from $8.4 billion reported in fiscal 1Q16. Revenues from its Footwear, Apparel, and Equipment segments rose 6.8%, 8.9%, and 3.7%, respectively. Revenues from its Global Brand segment fell 42.3% between fiscal 1Q16 and fiscal 1Q17.

Nike’s revenues from North America, Western Europe, Central and Eastern Europe, Greater China, and Japan rose 6.1%, 7.4%, 9.7%, 15.1%, and 36.9%, respectively, in fiscal 1Q17. Its revenues from emerging markets fell 2.2% YoY (year-over-year) in fiscal 1Q17.

Nike’s net income and EPS (earnings per share) rose to $1.3 billion and $0.73, respectively, in fiscal 1Q17 compared to $1.2 billion and $0.67, respectively, in fiscal 1Q16.

Cash and cash equivalents

Nike’s cash and cash equivalents fell 18.1%, and its inventories rose 10.9% YoY in fiscal 1Q17. Its current ratio fell to 2.7x, and its debt-to-equity ratio rose to 0.74x in fiscal 1Q17 compared to 2.8x and 0.61x, respectively, in fiscal 1Q16.

We’ll discuss Greif (GEF) in the next article.

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