Nike's (NKE) "disappointing" Q4 results and lower guidance triggered "a move to the sidelines" on the stock, Morgan Stanley said Friday in a note.
The investment firm downgraded Nike's rating to equalweight from overweight and slashed the price target to $79 from $114.
Nike's revenue in the three months ended May 31 fell to $12.61 billion from $12.83 billion a year earlier. Analysts polled by Capital IQ expected $12.86 billion. Earnings rose to $0.99 a share from $0.66 a year earlier, the company said Thursday. Analysts expected $0.83.
Nike's "timeline to revenue growth [and] P&L improvement has been kicked out for at least" the next 12 months, Morgan Stanley said.
The H2 "inflection potential was the primary catalyst driving our prior overweight thesis, and is now not in view," the note said. While Nike is undergoing strategic change, its "recent performance has been riddled with quarterly misses [and] guidance cuts," Morgan Stanley said.
The P&L volatility will likely persist in the near term and the company's "long-term growth [and] profitability trajectory is subsequently both unclear [and] lower than our prior assumption," the note said.
"We had thought [Nike's] negative EPS revision cycle was behind them," Morgan Stanley said. "That does not seem the case anymore, and even lowered FY EPS guidance may not prove achievable,"
Nike shares slumped 19% in recent trading.
Price: 75.99, Change: -18.21, Percent Change: -19.33
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