Nike: Holidays Are Toast

 

  • Nike reported strong results for FQ1'22, but the company guided to a dismal holiday season.
  • The athletic apparel company cut the FY22 growth rates in half to only mid-single digits.
  • Factories closed in Vietnam can't reopen in time to manufacture footwear or apparel capable of reaching North American markets prior to the holidays.
  • The stock faces multiple compression along with flat EPS growth to where a 30x multiple (still aggressive) leads to a price target of only $107.
  • Looking for a helping hand in the market? Members of Out Fox The Street get exclusive ideas and guidance to navigate any climate. Learn More »

The market was already over pricing the value of Nike (NKE) heading into their FQ1'22 results despite known supply chain issues with Vietnam factories closed due to COVID-19. Investors probably can't be blamed for looking past these issues after the athletic footwear company had soared past expectations in prior quarters. My investment thesis is ultra Bearish on the stock priced for perfection, now facing an obvious period of prolonged weakness.

Read the full article on Seeking Alpha. 

Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Update - Sept. 24

Funny to see these analysts lower their PTs, but still maintain buys. A $166 PT isn't bullish and the stock would appear to have major downside risk to close the gap below $130.

-Telsey Advisory Group analyst Joseph Feldman maintained Nike with an Outperform rating and lowered the price target from $180 to $176.
-Morgan Stanley analyst Kimberly Greenberger maintained Nike with an Overweight rating and lowered the price target from $221 to $201.
-Deutsche Bank analyst Gabriella Carbone maintained Nike with a Buy rating and lowered the price target from $171 to $166.

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