On Wednesday, Nike Inc. (NYSE:NKE) saw its price target lowered to $89 from $91 by TD Cowen, while the firm maintained a Hold rating on the stock. The revision reflects concerns over near-term growth prospects, particularly in the first half of fiscal year 2025, based on weakening market signals from North America.
TD Cowen's analysis suggests that while Nike's management may reiterate the guidance provided in March, current trends indicate a potential downturn since that update. The new price target is based on 21 times the firm's estimated earnings per share (EPS) of $4.17 for fiscal year 2026 and 18 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). These multiples are consistent with historical averages but account for anticipated lower growth and increased risk.
The adjustment comes amid a broader reassessment of expectations for Nike's performance in the coming year. The market is being cautioned to temper expectations for the first half of fiscal 2025 as the company navigates through a challenging retail environment.
Despite the reduced price target, the Hold rating suggests that TD Cowen believes Nike's stock is currently valued appropriately, taking into account both the growth concerns and the company's long-term brand strength and market position.
In other recent news, Nike is forecasted to report its weakest revenue growth in two years in its fourth-quarter results due to rising competition from Deckers' Hoka and Roger Federer-backed On. Analysts predict a marginal revenue increase of only 0.2%, reaching $12.85 billion, while adjusted earnings are expected to grow 26.4% to 83 cents per share. In response to these challenges, Nike has initiated a $2 billion cost-saving initiative over the next three years.
The sportswear giant has also been the subject of various financial revisions. Oppenheimer upgraded Nike's rating from Perform to Outperform, citing the company's potential for growth and recovery. Conversely, Williams Trading, Barclays, and Truist Securities have reduced their price targets for Nike due to concerns over valuation, macroeconomic challenges, and a lack of top-line growth visibility, respectively.
As part of recent developments, Nike is looking forward to the upcoming Olympic Games in Paris to regain its footing and plans to highlight its performance products such as the Alphafly 3 racer and the Pegasus running shoe. The company is also initiating workforce reductions as part of its cost-saving measures. Despite the mixed analyst sentiments, the average rating among 40 analysts on Nike's stock remains a "buy."
InvestingPro Insights
Nike Inc. (NYSE:NKE) has been navigating through a challenging retail environment, as reflected in the recent price target revision by TD Cowen. In light of these developments, several metrics and tips from InvestingPro could offer additional context for investors considering Nike's stock. With a market capitalization of $143.01 billion and a P/E ratio standing at 27.71, Nike showcases its significant presence in the market. Despite concerns over near-term growth, Nike has a history of consistent dividend payments, having maintained them for 41 consecutive years, which may appeal to income-focused investors.
An InvestingPro Tip worth noting is that Nike operates with a moderate level of debt and has liquid assets that exceed short-term obligations, suggesting a stable financial position. Additionally, analysts predict the company will remain profitable this year, backed by a solid performance over the last twelve months. While some analysts have revised their earnings downwards for the upcoming period, the company's prominent status in the Textiles, Apparel & Luxury Goods industry and its ability to sufficiently cover interest payments with cash flows remain key strengths.
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