Brean Capital Wary on Nike Inc (NKE); Here’s Why


Nike Inc (NYSE:NKE) is preparing to roll out its second-quarter print tomorrow, but one analyst is remaining on the sidelines even amid a bar of expectations that is already “likely low enough.” From GM pressures to the athletic retailer giant’s lackluster innovation pipeline, Brean Capital analyst Eric Tracy remains a skeptic, criticizing NKE for shortcomings in visible technology as well as platform introductions that he deems as “more evolutionary than revolutionary.”

In fact, from the analyst’s eyes, these limitations paint a picture of an innovation pipeline in dire need of a recharge and could prove to be an obstacle for North America (NA) futures. Therefore, ahead of the company’s quarterly earnings, the analyst reiterates a Hold rating on NKE without listing a price target.

Tracey underscores, “We are maintaining our Hold rating on shares of NKE ahead of Tuesday’s print, with our neutral stance largely based around our continued concern that ongoing cyclical slowdown in North America (driven by more muted innovation pipeline, revolutionary intro unlikely until at least Fall ’17, in our view) largely offsets int’l growth levers, while upside catalysts beyond relatively low quality tax/ repurchase levers limited over the NT, given our expectations for continued GM pressure (highly promotional holiday driving pressure beyond just “discrete items” called out in 1Q).”

Ultimately, “While pullback in shares since our 9/28 D/G […] has improved risk/reward, we believe the combination of NT headwinds and limited upside drivers leaves risk reward relatively balanced, even as we remain enthusiastic about the LT story (top down design focus, accretive mix shifts towards DTC/ int’l, and revolutionary supply chain investments),” Tracy surmises.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, four-star analyst Eric Tracy is ranked #492 out of 4,283 analysts. Tracy has a 51% success rate and gains 6.6% in his yearly returns. When recommending NKE, Tracey yields 1.1% in average profits on the stock.

TipRanks analytics indicate NKE as a Buy. Based on 28 analysts polled in the last 3 months, 17 rate a Buy on NKE, 10 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $61.64, marking a nearly 21% upside from where the stock is currently trading.