NKE

By Dean Seal

Shares of Nike Inc. fell more than 13% to a 52-week low of $82.50 on Friday after delivering a downbeat outlook that pushed Wall Street analysts to cut their price targets for the company, though not their ratings of the stock.

The shoe manufacturer reported after the bell on Thursday that its inventories were up 44% to $9.7 billion in the latest quarter and its bottom line was pressured by higher discounts and freight costs.

Shares started sliding in off-hours trading, and continued to tumble in premarket trading on Friday as analysts cut their price targets for Nike, but notably declined to downgrade the stock's rating.

UBS analysts said in a research note that while Nike's latest quarter shows some challenges in the near term, the company continues to be a long-term outperformer as it accelerates its consumer direct business and its business in China continues to rebound.

Analysts at Credit Suisse trimmed their price target to reflect Nike's conservative guidance, but noted that there is "opportunity in the dip" that the company's stock is experiencing.

JPMorgan analysts cut their price target based on the company's earnings expectations, but said its brand momentum across markets has been sustainable and provides insulation to macroeconomic volatility.

Analysts at Stifel said strong demand during the latest quarter was overshadowed by Nike's inventory woes and foreign exchange headwinds. But clearances pressures should reverse by fiscal year 2024, they said.

"Given Nike's track record for successfully navigating difficult macro environments, we are comfortable extending our time horizon for valuation to FY24," the Stifel analysts said in a note.

Wedbush analyst Tom Nikic also took on an optimistic tone. In a note, he said that with Nike's latest guidance, the stock should now move higher if growth in its Chinese business recovers, inventory growth moderates, demand gets kick-started by upcoming sporting events and consumers respond positively to new innovations in its product lines.

"We do have confidence in [Nike's] ability to navigate choppy waters and emerge more rapidly from the current disruption than most other brands we cover," Mr. Nikic said.

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

September 30, 2022 14:12 ET (18:12 GMT)

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