Morgan Stanley cut its Nike price target to 27 from 31, with analyst Alex Straton saying the company's first quarter is likely this year's high watermark rather than the low. Straton, who went underweight on the stock late last year, said Nike's guidance embeds a high single digit sales decline and that reaching full-year targets requires both top-line and earnings trends to degrade from here. She attributed the pressure to excess inventory in North America and a similar dynamic in China, the two biggest sportswear markets in the world, compounded by a challenging macro backdrop. Straton flagged three problem areas for the company: Sportswear, which makes up almost two-thirds of the portfolio and roughly 30 billion dollars in revenue, the Jordan brand, and a material change in the China outlook. She said she has not seen the bottom in negative revisions and that Nike may face a shrink-to-grow story, with further de-rating possible if the company settles into a lower-growth, lower-margin multiple. Nike holds an investor day in November, where Straton said the company needs to clarify the right revenue size for Sportswear, Jordan and China before investors can gauge when growth and historical margins might return.
Nike IncMorgan Stanley cut Nike's price target to 27 from 31, citing embedded high-single-digit sales declines and further de-rating risk.
Morgan StanleyMorgan Stanley is the analyst firm cutting Nike's price target, an action about Nike rather than a development affecting Morgan Stanley itself.
