J.P. Morgan’s Matthew Boss cut his earnings estimate and stock price target, ahead of Q1 results due out next week
Shares of Nike Inc. were tripped up on Monday, after J.P. Morgan warned investors that the athletic apparel and gear giant’s quarterly results could cause a selloff.
Nike is scheduled to release results for its fiscal first quarter through August on Oct. 1, at about 4:15 p.m. Eastern.
Ahead of those results, J.P. Morgan analyst Matthew Boss said that based on what he gleaned from recent access to management and to his “global fieldwork,” he placed Nike’s stock on “negative catalyst watch.”
The stock NKE-0.37% fell 0.8% in morning trading. The pullback comes after it ran up 6.8% on Friday, its biggest one-day gain in nearly two years, after Nike named a new chief executive.
Boss’s call, a week before the results, is based on a cautious consumer and digital promotions in China; softening in traffic and increased competition in the Europe, Middle East and Africa region; and increased challenges within direct-to-consumer stores in North America due to a strapped low-income consumer.
Boss cut his estimate for quarterly earnings per share to 48 cents, which is down from 94 cents a year ago, and below the FactSet consensus of 52 cents.
He expects revenue to drop 10.3% from a year ago, implying revenue of $11.61 billion, which is below the current FactSet consensus of $11.64 billion.
Boss reiterated the neutral rating he’s had on the stock since late June, when he downgraded the stock from overweight. He trimmed his price target to $80 from $83, with the new target nearly 7% below current levels.
Besides Boss’s “negative” call, recent history gives investors a good reason to be cautious ahead of earnings.
Nike’s stock has sold off sharply the day after the past three earnings reports, including a record 20% selloff on June 28 after fourth-quarter results.
And after the past 12 quarterly reports, the stock has fallen eight times, by an average of about 9%, based on FactSet data. The four times the stock gained ground, it rose by an average of 6.8%.
Looking forward, while Boss said he was encouraged by Nike’s appointment of a long-time insider, Elliott Hill, as its CEO, he doesn’t believe Hill can navigate a “financial model inflection” until fiscal 2027.
Nike’s stock has dropped 21% year to date, while the Dow Jones Industrial Average DJIA 0.15% has gained 11.6%.