Analyst reactions after Nike’s 3Q17 results
As we discussed in Part 1, Nike’s results failed to impress investors, and the stock slid 7% on March 23, the day after the company released 3Q17 results. This was the biggest intraday decline for the stock over the past 18 months, and it reduced the company’s year-to-date gains to a little over 6%.
However, Wall Street does not seem to be perturbed with the company’s results, as there have been no rating changes—so far, at least. And while several analysts have lowered their price targets, others have increased their targets.
The upward revision club
Susquehanna, Citigroup, and DA Davidson were the ones who continued to remain positive about Nike and raised their price targets.
An analyst at DA Davidson stated: “While we are disappointed in ongoing gross margin pressure and a steeper FX hit to EPS in FY18, we are encouraged by NKE’s product innovation pipeline (four new cushioning platforms), SG&A discipline, and continued DTC success.” The firm maintained a “buy” rating and increased price target to $70 from $64.
Susquehanna raised its target price to $65 from $64, while maintaining a “positive” rating. Analyst Sam Poser explained the action this way: “Gross margins were a touch light in the quarter, but revenue was fairly in line, and we are seeing strong cost control benefits on the SG&A line from Nike’s edit to amplify initiatives. In other words, Nike pulled one of its many levers to deliver upside. We believe Nike has a host of additional levers at its disposal to drive earnings upside going forward.”
Citigroup raised its price target for Nike to $66 from $60.
The downward revision club
Deutsche Bank, FBR, and Stifel lowered their price targets on Nike. Deutsche Bank reduced its price target to $64 from $66, stating: “Given cautious commentary on the North America marketplace, we are tempering our gross margin forecast and weighting revenue growth further to 2H.”
Stifel reaffirmed its “buy” rating while dropping price target to $66 from $68 citing concerns about the challenging North America landscape and the ongoing currency headwinds for Nike. By comparison, FBR reduced its target price to $53 from $55 while reaffirming its “market perform” rating for Nike.
Notably, ETF investors seeking to add exposure to NKE can consider the ProShares Ultra Consumer Goods ETF (UGE), which has 2.4% of its portfolio in NKE.
Continue to the next part for a comparison of Nike’s ratings with those of peers.