On Monday, Williams Trading adjusted its stance on Nike (NYSE:NKE), downgrading the stock from Hold to Sell and setting a new price target of $85, a decrease from the previous $92. The firm expressed concerns over Nike's diminishing strength, citing various strategic missteps that appear to be impacting the company's performance and market position.
Williams Trading highlighted that Nike seems to have strayed from its historically self-critical approach, now seemingly relying more on consultants for strategy rather than its own experts. The firm also pointed out that Nike's senior leadership may be too rigid, not open to diverse opinions, and that financial objectives are overly influencing merchandising decisions. This shift towards data-driven strategies over "educated gut" is believed to be a departure from the practices that helped Nike grow into a $50 billion company.
The analyst forecasted a potential slight miss in Nike's upcoming third-quarter 2024 earnings report, scheduled for Thursday, March 21st after market close (AMC). Additionally, there is an expectation that the company will once again reduce its full-year 2024 guidance. The report also suggested that Nike's historical valuation multiples are no longer justified due to the waning appeal of several key product lines that previously contributed to those multiples.
Further concerns were raised about the company's recent product launches and marketing strategies. Williams Trading pointed to comments made during Hibbett's fourth-quarter 2024 earnings call about less successful shoe releases and Foot Locker (NYSE:FL)'s fourth-quarter 2023 earnings call, which highlighted Nike's shift from fostering brand equity to pushing sales.
The lack of compelling new products that resonate with consumers and overconfidence in the market's reception of new styles, such as the upcoming AirMax DN, were also among the issues that the firm believes will present both short- and long-term challenges to Nike's sales and margin growth.
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