11:42 AM EST, 12/13/2024 (MT Newswires) -- Nike's ( NKE ) fiscal Q2 earnings will likely beat estimates, but its Q3 guidance may be below consensus expectations as its sales and gross margin will remain challenged, Morgan Stanley said in a note to clients Friday.

"We expect slight [Q2] EPS outperformance, but on lower-quality drivers [and] reflective of a very challenged trend - making for a similar outcome to recent quarters," the investment firm said in the note.

Morgan Stanley said consensus expectations for sales and gross margin to significantly improve quarter on quarter in Q3 are "overly optimistic" due to similar year on year comps as in Q2, recent negative comments from retail partners, and "no clear/comprehensive go-forward strategy."

Meanwhile, the "stock appears to have found a valuation floor" as investors wait for strategy updates from Nike's ( NKE ) new Chief Executive Elliott Hill, the note said.

"We suspect Hill's commentary will drive any stock moves near-term more so than fundamentals," the firm said.

Morgan Stanley trimmed Nike's ( NKE ) price target to $80 from $82, while keeping its equal-weight rating.

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