Nike Stock Plunges After Strong Earnings Report

Nike stock took a steep nosedive on Friday following a second-quarter earnings report that exceeded expectations but was overshadowed by concerns about future sales. As a result, two Wall Street analysts have downgraded their ratings on shares.

Sales Outlook Raises Concerns

In Friday's trading, Nike stock plummeted by 10% to $109.95. This decline follows the company's announcement on Thursday regarding an anticipated decline in sales for the remainder of the fiscal year ending in May. Management attributes this slowdown to consumers exercising caution with their spending, especially in China and Europe.

Strategic Measures to Offset Sluggish Sales

In response to this challenging forecast, Nike revealed plans to streamline its operations and save $2 billion over the next three years. The planned cost reductions include simplifying its product assortment, implementing automation, and reducing management layers. Chief Financial Officer Matthew Friend emphasized that the majority of these savings will be reinvested to drive growth.

Analyst Downgrades

Following the news, two analysts expressed their concerns and downgraded their ratings on Nike shares. John Kernan of Cowen downgraded his rating from Buy to Hold and lowered his price target from $129 to $104. Similarly, Zachary Warring of CFRA downgraded his rating from Hold to Sell, with a price target of $91.

Both analysts cited competition from other brands as a contributing factor to their downgrades. In particular, Deckers Outdoor-owned HOKA and On have gained popularity among runners and pose a threat to Nike's market share.

Optimism Persists Among Wall Street

Despite these downgrades, most investors on Wall Street remain optimistic. Citi's Paul Lejuez and over 20 other analysts still maintain Buy ratings on Nike stock. Lejuez even views the recent selloff as a buying opportunity and expects the stock to reach $135.

Conclusion

While Nike faces challenges ahead, the company's strategic measures and continued support from analysts suggest a positive outlook for the future.