Nike Stock Down 11% After a Margin Bombshell Prompts Wall Street Revisions

Nike Stock NYSE:NKE

Nike stock was trading at $84.30 as of 09:54 AM EDT.

Analysts’ analysis of Nike’s (NYSE:NKE) margin declined as the athletic giant struggles to get rid of excess inventory which caused Nike stock to plunge on Friday. While EPS projections for the current fiscal year are being drastically reduced, Nike believes the margin pressure will only be temporary.

The near-term promotional activities and macro uncertainty are weighing down F23 EPS but should lead to a healthier business over the medium term and a stronger growth algorithm in F24, according to Bank of America, which retained a Neutral rating on Wall Street.

Options Trading On Nike Stock May Profit From The Impending Earnings Move.

According to Morgan Stanley, Nike’s (NYSE:NKE) reduced valuation feels appropriate for the time being but also could represent an appealing entry point for long-term investors. The company maintained an Overweight rating but made clear that it preferred other sector companies. The lessened short-term expectations resulted in the PT on Nike being reduced to $120.

Wells Fargo emphasized cost containment and potential revenue growth but believes that margin pressure brought on by high freight and transportation costs, adverse FX conditions, and increased markdowns cannot be disregarded.

Nike Stock, Earnings Outlook

In addition, Jefferies cut its price goal to $115 from $130, Cowen lowered its price target to $114 from $127, and Deutsche Bank cut its price target to $99 from $123. BMO Capital Markets also downgraded its price target on Nike (NYSE:NKE) to $110 from $128. In premarket trade on Friday, Nike (NYSE:NKE) fell 10.30% to $85.51.

Nike’s FQ1 earnings were mixed, which alarmed investors enough to cause a 9% after-hours decline in the stock. Nike, like many retailers, has an excessive amount of inventory and must accept a lower gross margin in order to shift more inventory. With falling sales for three straight quarters, China is still a downer. Given the current macro environment and a still premium value of 33x FY23 profits, the rating is changing to neutral.

Featured Image-  Megapixl @ Kitleong

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