Analysts provided their two cents on athletic apparel leader Nike Inc (NYSE:NKE), following its Q4:16 earnings report. Both analysts lower their price target due to disappointing key metrics for the quarter. However, one is more optimistic that Nike will bounce back in 2017, while the other waits on the sidelines to see if the company can prove itself in future quarters.

Analyst Camillo Lyon of Canaccord explained his thoughts on NKE following the company’s Q4 2016 earnings release. The company posted better than expected EPS of $0.49 but disappointing revenues and gross margins relative to the his estimates. Lyon credits the higher EPS to both a lower expense growth and a lower tax rate. The analyst believes the mediocre earnings reflect product weakness compared to competitors. He explains, “The relatively soft operating Q4 results were hardly surprising given NA retailers’ consistent commentary around weak signature basketball coupled with intensifying competitive pressures from UA and Adidas.”

Although the company exhibited impressive growth in its running and Direct-to-Consumer (DTC) segments, its North American region displayed flat revenue growth. The analyst credits this to returns and cancellations in its signature basketball segment. Lyon also mentioned high inventory of 11.6% compared to overall sales growth of only 6%.  The analyst believes high inventory will affect gross margins. He explains, “While NKE has cleared the excesses in the full-price channel, it will likely take 1-2 more quarters to move the lingering inventory through its outlet stores and the off-price channel, likely causing more near term GM pressure.”

The analyst states that futures decelerated in all of Nike’s markets. Lyon is specifically concerned with unit deceleration, noting growth of only 4% compared to 10% in Q3. According to the analysts, this decline indicates retailer doubts regarding price. He explains, “The significant deceleration in units could speak to the price ceiling NKE may be bumping up against as retailers do not see the brand selling through at rates comparable to last year.” If this trend continues, the analyst notes that future orders will continue to decline following major events such as the Rio Olympics and euro champs.

Regarding guidance for 2017, the analyst notes that management kept the same optimistic estimates as last quarter, which he believes is an exaggeration. However, Lyon notes that Q1 guidance “appear[s] to be highly conservative and sets up well into the Q1 print as the quarter looks fairly-derisked.” While the company expects the second half of 2017 to benefit from higher sales and margins due to an easing of FX headwinds, the analyst believes that “giving the shifting competitive dynamics, the onus of 2H17 could be too aggressive.”

Lyon explains that he needs to see more consistent quarterly gains before recommending to buy shares. He states, “Overall, NKE appears to be in the midst of a product/trend transition. While early sell-throughs of recent signature basketball releases (LeBron Soldier 10 and KD9) seem to be selling well, we want to see sustained momentum in its key platforms (basketball and running) before becoming constructive on the stock.”

The analyst reiterates a Neutral rating on the stock and slightly reduces his price target from $57 to $56.

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Camilo Lyon has a yearly average return of -1.5% and a 45% success rate. Lyon is ranked #3186 out of 3990 analysts.

Piper Jaffray analyst Erinn Murphy also commented on NKE following its Q4:16 earnings release. The analyst notes that while EPS came in better than expected, “the quality of earnings were challenged with inventory and gross margin missing expectations.” Gross margin for the quarter came in at 45.9% compared to the analysts’ estimates of 46.7%, while inventory came in at 12% vs 8% last quarter. Regarding inventory, management stated they have a good handle on inline inventory but need to rid itself of excess factory channel inventory through third party partners. Murphy also mentioned disappointing futures, which grew 11% CC compared to the analyst’s 13% estimates.

Murphy comments on the company’s FY17 and Q1 guidance, where the company reiterated previous sales guidance for FY17. The company also expects a 30-50 bps expansion of gross margin. The analyst believes this expected growth “is a reflection of higher ASP, on-going manufacturing efficiencies, and continued growth in” However, the analyst does express concern regarding Q1 gross margins, expected to decline by 100 bps as a result of FX headwinds, which will negatively impact the first half of 2017 more than the second half. The analyst mentions SG&A expenses in the mid to high teens rate for Q1 as a result of higher demand creation spend related to the Olympics. Both of these factors cause the analyst to lower her FY17 and Q117 EPS estimates. She states, “While we believe in the NIKE brand, we note there are some near-term challenges with visibility (FX, gross margin).”

The analyst reiterates an overweight rating on the stock but lowers her price target from $69 to $58.

According to TipRanks, out of all the analysts who have rated the company in the past 3 months, 83% gave a Buy rating while 17% remain on the sidelines. The average 12-month price target for the stock is $65.42, marking a 19% upside from where shares last closed.