UPDATE: Brean Capital Downgrades Nike (NKE) to Hold
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(Updated - September 28, 2016 9:45 AM EDT)
Brean Capital downgraded Nike (NYSE: NKE) from Buy to Hold and removed its price target (prior $62.00). The downgrade followed the release of Q1 results. Analyst Eric Tracy pointed out the company's "innovation reset" in North America.
Tracy explained, "We are lowering our rating from Buy to Hold following last night's 1Q results, with our more neutral stance based on our belief that NKE is now in the midst of an 'innovation reset' as evidenced by 1) more evolutionary product innovation amidst a consumer shift towards less technical, more lifestyle product (relative to 'visible' tech platforms that tend to drive rev growth: Air, Lunar, Free, Flyknit) and 2) decelerating futures growth in North America as the market resets. We believe NT upside catalysts are relatively limited (with EPS algorithm increasingly driven by lower quality SG&A, tax and share count), even as we continue to believe in the LT story (supported by top-down design focus, accretive mix shifts to DTC/int'l, and mfg/ supply chain revolution)."
The analyst added, "Accordingly, while we are tweaking our estimates lower, and don't assign a FV to Hold rated stocks (sensitivity analysis herein frames a range of outcomes; arrives at base case FV of $52, 20x our new FY18 EPS est), we would look to get more constructive on share pullbacks and/or improved visibility to quality EPS growth/potential upside."
Shares of Nike closed at $55.34 yesterday.
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