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CLSA Rated Nike as ‘Underperform’

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Price movement

Nike (NKE) has a market cap of $86.7 billion. It fell 0.64% to close at $52.93 per share on January 19, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.46%, 4.0%, and 4.1%, respectively, on the same day.

NKE is trading 1.1% above its 20-day moving average, 2.8% above its 50-day moving average, and 2.8% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Growth ETF (IWY) invests 0.89% of its holdings in Nike. The YTD price movement of IWY was 2.5% on January 19.

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

  • VF Corporation (VFC) — $21.5 billion
  • Under Armour (UAA) —$12.2 billion
  • Skechers USA (SKX) — $3.9 billion

NKE’s rating

On January 19, 2017, CLSA has initiated its coverage of Nike with “underperform” rating and also set the stock’s price target at $55.00 per share.

Atlantic Equities has initiated the coverage of Nike with an “overweight” rating and also set the stock’s price target at $65.00 per share.

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Nike’s performance in fiscal 2Q17

Nike (NKE) reported fiscal 2Q17 revenues of $8.2 billion, which represents a YoY (year-over-year) rise of 6.4%, compared to revenues of $7.7 billion in fiscal 2Q16. Revenues from its Footwear, Apparel Brands, and Global Brand divisions rose 5.0%, 7.3%, and 16.7%, respectively, YoY in fiscal 2Q17.

The company’s gross profit margin narrowed 140 basis points YoY in fiscal 2Q17. This narrowing was due to increases in product costs, the negative impact of foreign exchange, and a rise in off-price sales, partially offset by an increase in selling prices.

Net income and EPS

Nike’s (NKE) net income and EPS (earnings per share) rose to $842.0 million and $0.50, respectively, in fiscal 2Q17, compared to $785.0 million and $0.45, respectively, in fiscal 2Q16. The rise in EPS was due to an increase in revenue and a fall in weighted average diluted common shares outstanding, partially offset by a fall in gross margins.

Nike’s cash and cash equivalents and inventories rose 12.7% and 9.4%, respectively, YoY in fiscal 2Q17. Its current ratio rose to 3.1x in fiscal 2Q17, compared to 3.0x in fiscal 2Q16.

In the final part of this series, we’ll discuss Kate Spade (KATE).

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