BTIG analyst Camilo Lyon downgraded Nike (NYSE: NKE) to Neutral from Buy as recent checks point to severe supply chain disruptions stemming from factory shutdowns in Vietnam.

Checks show a worsening situation in Vietnam compared to the latest BTIG from the end of June. As a result, the company is now facing “virtually no unit production” at its Vietnam-based factories, which in the past accounted for 51% of footwear and 30% of apparel units, or 43% of total units.

“We believe the risk of significant cancellations beginning this holiday and running through at least next spring has risen materially for NKE,” the analyst says in a note sent to clients.

“Based on our supply chain checks with our manufacturing contacts in Vietnam and Singapore, we estimate F22 sales could be flat to +LSD vs. current guidance of +LDD growth, with the biggest impacts to FQ2-FQ4. We now are modeling F22/23 EPS of $3.29/$4.33, effectively pushing our earnings estimates out one year. We note that our downgrade is based solely on challenging supply dynamics that will make it very difficult for NKE to meet robust demand driven by high brand heat, let alone its +LDD revenue growth guidance this year, we believe,” Lyon said in a note sent to clients.

Moreover, the analyst is pessimistic that he will raise estimates higher this year again, and instead, he points to a risk that there might be a downward revision.

“Lastly, over its history, NKE stock has been most tightly correlated with sales growth, so with growing evidence that sales will likely stall, we believe NKE's stock will at best tread water until more clarity is had around its manufacturing issues, and at worst suffer from reduced sales guidance and ensuing multiple compression. While NKE typically is incredibly well-equipped to manage such disruptions, we fear this issue is just too large to control, even for the best-run athletic brand in the world.”

As a result of the aforementioned factors, BTIG is moving to the sidelines until better visibility can be achieved.

BTIG doesn’t provide price targets on Neutral-rated stocks. The prior PT on NKE was $177.00 per share.