On Friday, Nike (NYSE:NKE) faced a tough day as its shares took a significant hit. The company’s iconic swoosh might as well have been replaced with an “ooof” as the stock experienced its largest ever one-day drop, plummeting 20% after disappointing fiscal fourth quarter (May quarter) results.
While the revenue and profit figures were mixed, the real let down came from the company’s outlook. Macro headwinds and ongoing weakness in China were behind a reduced sales forecast for FY25. The sportswear giant now expects a high-single-digit revenue decline for the first half of fiscal 2025, compared to the previously anticipated low-single-digit drop. Wall Street had predicted a 2.3% decline. Additionally, Nike’s guidance for the first quarter of fiscal 2025 (ending in August) forecasts a revenue decline of around 10%, significantly below analysts’ expectations of a 2.8% decrease.
It was not long ago that Oppenheimer’s Brian Nagel, an analyst ranked in the top 1% of Wall Street stock pros, upgraded his rating on NKE. He cited a “historically discounted share valuation,” apparently pessimistic investor sentiment, and the intermediate to long-term prospects for a fundamental recovery, based on management’s substantial “strategic repositioning efforts,” as reasons for his optimism.
Has the latest readout changed the 5-star analyst’s view? Not really. While Nagel concedes the results and updated FY25 guidance proved “even weaker than our downbeat and below Street forecasts,” he still sees the readout and commentary as “likely a ‘last bad’ quarter and ‘healthy clearing event for NKE.”
“NKE is working to aggressively reposition the company’s global enterprise amid an increasingly soft demand backdrop in the US and in markets across the globe,” Nagel went on to say. “We continue to very much expect NKE efforts to help to fuel an even stronger recovery at the company, as cyclical pressures ease.”
All told, Nagel rates Nike shares an Outperform (i.e., Buy), with a $120 price target, suggesting the shares will rebound 59% over the coming year. (To watch Nagel’s track record, click here)
Most of Nagel’s colleagues are almost evenly split between bulls and skeptics. With an additional 13 Buy recommendations, 15 Holds, plus 2 Sells, the stock claims a Moderate Buy consensus rating. At $96, the average price target factors in one-year returns of ~27%. (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.
