Nike stock falls to lowest price this year after rare 'sell' call by analyst

Poser cut his rating on the stock to sell, after being at hold for the past two years. That makes Poser only the third of the 35 analysts surveyed by FactSet to be bearish on Nike.

He also slashed his price target by 21%, to $95 from $120, which makes him the top bear on Wall Street, based on available FactSet data.

Nike’s U.S. business has become “far more difficult” than expected when the company reported fiscal third-quarter results in March, while the turnaround in China has been “choppy,” Poser said. And with inventories that are above optimum levels, which will likely keep margins under pressure as U.S. consumers may be becoming trained to look for promotions.

“[N]ike, both online and in its outlet stores, is promoting many styles that are made for premium distribution at prices under $100 that are now competing with shoes sold in the family footwear,” Poser wrote in a note to clients.

But it’s not just about price.

Poser said he doesn’t believe there is enough compelling new product offerings, and the old product has become “stale.”

“Specifically, Air Max running product appears almost dead, and footwear for the moderate channel [family footwear] is stale, and will remain stale through the balance of calendar 2023,” Poser wrote.

He’s worried that current activity, in which consumers’ fear of missing out on new product launches has deteriorated, is “eerily familiar” to the activity seen in 2015 and 2016, “when Nike stretched the Jordan brand to near over saturation, in order to offset lack of newness in other categories.”

After running up 30% in 2015, Nike’s stock dropped 18.9% in 2016, for a net two-year gain of 5.7%. In comparison, the Dow fell 2.2% in 2015 and rallied 13.4% in 2016, for a net two-year gain of 10.9%.

Poser also cut his fiscal 2023 earnings-per-share estimate to $3.10 from $3.13, which compares with the FactSet EPS consensus of $3.23. He also lowered his revenue estimate to $50.68 billion from $50.83 billion — the FactSet consensus is $50.97 billion — and trimmed his gross margin projection to 43.4% from 43.5%.

Nike’s stock has dropped 5.8% year to date, while the Consumer Discretionary Select Sector SPDR exchange-traded fund XLY, -0.31% has run up 17.0% and the Dow has edged up 0.4%.