Nike shares tumble after Barclays downgrade due to Increased Inventory Risk by

© Reuters. Nike (NKE) shares fall after downgrade due to increased inventory risk

By Senad Karaahmetovic

Shares of Nike (NYSE:) fell nearly 3% in pre-market trading Tuesday after a Barclays analyst downgraded from Overweight to Equal Weight and cut his price target to $110 from $125 per share. share.

The analyst pointed to 5 main factors behind the downgrade to EW: 1) the risk thesis about falling wholesale sector demand, 2) the continued volatility in the China Market, 3) the surplus. inventory surplus in North America, 4) potentially eroding demand in both North America and EMEA, and 5) Opposite FX, mainly in Europe.

“We believe the fall/holiday will continue to be heavily promotional across the U.S. Retail industry and worry NKE’s wholesale business may begin to see revenue slow in spring 23. ,” the analyst added in a client note.

For its FQ1 earnings report, the analyst looks at inline sales and EPS if the company pulls back on demand generation.

“We believe such a component of the quarter will be of low quality and we are more concerned with current and future demand trends and future margin risks,” the analyst added.

For China, the risks are growing and even North America’s failure to outperform again may be enough to subsidize weaker outcomes in China.

“Wholesale channel risk could keep the NKE range bound until there is greater visibility,” the analyst concludes.

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