12:21 PM EDT, 07/02/2024 (MT Newswires) -- Nike (NKE) needs to do some heavy lifting to right size its key product franchises that are in decline amid the derating of its shares, RBC Capital Markets said in a note Tuesday.

"Nike should emerge a stronger company pursuing a more radical overhaul which is necessary and resort of last option, however for us to turn more positive requires better product visibility also noting potential 2H25E earnings risk," said RBC analysts, including Piral Dadhania.

RBC said there has been some complacency in assessing Nike's equity story in recent months.

"A combination of The Fragmentation Hypothesis, turning fashion cycle away from Nike's core competency and tougher comparatives than peers has created a perfect storm," the report said. "Following FY25E guidance, which materially resets expectations, Nike should have a better base from which to reset its business, in our view."

RBC said the shares have de-rated closer to sector average valuation but still not enough compared with its growth prospects.

"Nike de-rating is partially helpful, however relative to its near term growth prospects...we believe it is not yet compelling enough," the analysts said. RBC cut its price target to $75 from $100 while reiterating its sector perform rating.

Price: 75.79, Change: -1.05, Percent Change: -1.36