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Nike Still Facing 'Significant Downside Risk' Over Coming Quarters, UBS Says
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Nike Still Facing 'Significant Downside Risk' Over Coming Quarters, UBS Says
Dec 20, 2024 12:51 PM

03:18 PM EST, 12/20/2024 (MT Newswires) -- Nike ( NKE ) still faces "significant downside risk" following its fiscal Q2 results as the sportswear company could deliver "more bad news" over the next quarters stemming from its inventory issues, UBS said in a note Friday,

The investment firm noted that despite ending Q2 with an inventory that was flat year-over-year, the company expects Q3 sales to decline by the low double digits. Markets could be miscalculating the time and cost it could take Nike ( NKE ) to "get inventory back to healthy levels," and the imbalance between inventory levels and sales "could take 2-3 quarters to fix," UBS said.

UBS added that Nike's ( NKE ) new CEO Elliott Hill did not get a chance to impact the company's inventory orders for fiscal Q4 or fiscal Q1, meaning the company could have more inventory coming in than it wants for those quarters. The firm also said that Nike's ( NKE ) new product pipeline may not fill up as quickly as some would expect as the company is still in the beginning stages of putting sports back at the center of its business.

UBS cut its fiscal Q3 earnings estimate by 40% to $0.31 per share and fiscal Q4 estimate by 53% to $0.26 per share. The firm also lowered its fiscal 2025 earnings estimate by 15% to $2.05, well below the consensus of $2.71.

The firm maintained a neutral rating on the stock as it believes in the company's ability to rebound over the long term, but cut its price target to $73 from $80.

NKE shares were edging 0.1% lower in recent trading.

Price: 77.03, Change: -0.07, Percent Change: -0.09

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