Nike(NYSE: NKE) recently announced its fiscal 2024 third-quarter earnings results (for the quarter ending Feb. 29), and the updated Wall Street opinions are starting to roll in. Several analysts covering the stock simply reiterated their forecasts after the footwear giant revealed weak sales trends. But Nike also attracted a significant downgrade from one analyst.
Let's look at why the analyst sees almost no upside potential for the stock over the next year.
If the shoe fits
An analyst at RBC Capital lowered the agency's rating on the stock to a hold from a buy following the Q3 earnings report. RBC reduced its 12-month price target on Nike shares as well, down to $100 per share from $110 per share. Given that the stock was trading at about that level before the earnings report, this suggests little room for growth in Nike's stock over the short term. Shares currently trade at about $94.
It's true that Nike's earnings update left a lot to be desired. Sales were essentially flat in Q3. That result stands in contrast to footwear industry peers like Deckers Outdoor, which saw strong growth in the most recent quarter. The lack of analyst enthusiasm likely is related to Nike executives forecasting continued sluggishness ahead through at least the rest of 2024.
Looking ahead
Nike has been cutting inventory for over a year, and so this demand shortfall isn't harming earnings by much. Profit fell by just 3% on a per-share basis this past quarter, for example. But the prospects for a growth rebound do seem limited as retailers continue to cut their inventories. As a result, investors might want to look toward more successful athletic shoe and apparel manufacturing peers such as Deckers and Lululemon Athletica before jumping into Nike stock.
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Demitri Kalogeropoulos has positions in Nike. The Motley Fool has positions in and recommends Lululemon Athletica and Nike. The Motley Fool recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
