Nike (NYSE:NKE) closed Wednesday’s trading session with a sharp ~7% drop, following a mixed fiscal first-quarter report for the August quarter.
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The company beat expectations on the profit profile, reporting EPS of $0.70 – though down from $0.94 a year ago, it still beat analysts’ estimates by $0.18. However, this strength didn’t extend to revenue, which declined 10.4% year-over-year to $11.6 billion, missing the consensus by $50 million.
On the earnings call, management said it was taking its FY25 guide off the table and postponing its Investor Day event due to the ongoing CEO transition. The previous guide, laid out when Nike last reported earnings in late June, called for FY25 revenue to decline by mid-single digits, with the first half experiencing a high-single-digit drop.
For the current quarter, the company anticipates that headwinds from Classics footwear and the challenging macroeconomic environment will persist, with FQ2 revenue expected to decline by 8-10%. Consensus was looking for a 6.9% drop.
Consequently, Baird analyst Jonathan Komp made some downward revisions to his NKE model. The analyst now sees F2025 EPS reaching $2.50 (down from $2.80), and F2026 EPS coming in at $3.00 vs. $3.35 beforehand.
That said, Komp keeps a positive stance, believing investors focused on the long-term will benefit eventually.
“We remain optimistic in the multi-year earnings recovery potential under incoming CEO Elliott Hill, supporting our favorable outlook at current levels (P/ E ~24X our F2027E, ~mid-teens multiple assuming higher earnings power) for patient investors,” said the 5-star analyst. “We ultimately see much higher earnings potential (i.e., $5.50/share+ assuming mid-teens margin) assuming balanced growth, positioning the stock as a compelling turnaround story.”
As such, Komp rates Nike shares an Outperform (i.e., Buy), backed by a $110 price target. Should the figure be met, investors will be pocketing returns of 23% a year from now. (To watch Komp’s track record, click here)
Overall, the bulls and the fencesitters are fairly evenly matched here, with 12 Buys and 14 Holds resulting in a Moderate Buy consensus rating for the stock. At $93.52, the average price target suggests the shares will gain 12.5% over the coming months. (See Nike stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
