Nike Shares Decline Nearly 4% After Company Slashed Full-Year Revenue Outlook

Nike shares plunged nearly 4% in extended trading on Thursday after the world’s largest athletic footwear and apparel seller slashed its full-year sales forecast and warned of delays during the holiday shopping season.

According to a Reuters report, the Beaverton, Oregon, footwear retailer has revised its sales forecast, now expecting a mid-single-digit growth rate for the full year instead of the low-double-digit rate it previously projected. Nike also predicted flat to slightly down revenue growth in the second quarter due to factory closures.

The company’s revenue rose 16% to $12.2 billion in the fiscal first quarter ended August 31, missing the market expectations of $12.6 billion.

Following this, Nike shares slumped about 4% to $153.32 in extended trading on Thursday.

However, the company’s diluted earnings per share surged 22% to $1.16, above the Wall Street consensus of $1.12 per share.

Analyst Comments

“Nike’s (NKE) F1Q shows ongoing brand strength, the consumer is spending and not price sensitive, China sales continue to rise, and the LT model is solid. Supply chain disruption, coupled with normalized demand creation expense, dampens flow through, but the supply chain is a temporary issue,” noted Randal J. Konik, Equity Analyst at Jefferies.

“With NKE’s l-term DTC model best-in-class among global consumer companies, we still see shares up at least 25% over the next 12 months.”

Nike Stock Price Forecast

Twenty-four analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $186.68 with a high forecast of $221.00 and a low forecast of $168.00.

The average price target represents a 16.98% change from the last price of $159.58. From those 24 analysts, 20 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $201 with a high of $362 under a bull scenario and $117 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

“Nike’s (NKE) stock fell 4% AMC as management cut FY22 guidance to reflect limited inventory availability from factory closures and transit delays. We remain bullish despite the cut, as transitory headwinds should abate and underlying demand for NKE products appears robust. We stay Overweight & trim our price target to $201,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“Nike (NKE) is in the early innings of transition from a wholesaler to a DTC brand. Success would make it one of few to benefit from the shift to eComm (~20% of ‘21 sales). Its DTC business (~37% of ‘21 sales) is igniting its next phase of margin-accretive revenue growth, driving a 16% 5Y EPS CAGR. NKE also stands to benefit from advancing global consumer activewear demand (due to the WFH-induced preference for comfort-oriented apparel/footwear and increased focus on health & wellness). NKE’s strategic portfolio decisions, tech investments, and supply chain innovation also create LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $196 from $181. Oppenheimer upped the price target to $195 from $150. HSBC lifted the target price to $205 from $162.

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