Nike Shares Under Pressure Amid Earnings Concerns

Investing.com — Nike shares faced slight pressure early on Monday as UBS issued a warning regarding a potential negative catalyst from its upcoming earnings report.

UBS Analysis

UBS analysts pointed out declining global sales trends, projecting weak third-quarter guidance and earnings-per-share (EPS) estimates below market expectations. They stated, "Our channel checks suggest Nike (NYSE:NKE)'s global sales growth trends deteriorated over the last 3 months."

EPS Projections

UBS estimates that Nike's Q3 implied EPS guidance will range from $0.47 to $0.57, which falls short of the market consensus of $0.55-$0.65 and the sell-side forecast of $0.66.

The analysts noted that this could significantly impact Nike's current valuation, which is trading at a 29x forward price-to-earnings ratio.

Sentiment and Expectations

Additionally, UBS commented, "The key is we think Nike sentiment has much more room to fall than many realize."

They expect Nike's 2Q report to reflect worsening fundamental trends, indicating that few investors are inclined to buy stocks when fundamentals are deteriorating.

Despite underperforming the S&P 500 by approximately 1,500 basis points over the past three months, UBS mentioned a 'fear of missing out' (FOMO) among some investors, who are anticipating a recovery in Nike's fundamentals.

However, the bank cautioned that these optimistic expectations may be premature, citing weaker U.S. direct-to-consumer sales, underperformance in Europe, and disappointing growth trends in China.

Challenges Ahead

UBS also reported that Nike's global Google (NASDAQ:GOOGL) search trends declined by an average of 8% in Q2, with an increase in year-over-year promotional activity, suggesting ongoing challenges.

Rating and Target Price

UBS maintained a Neutral rating on Nike, slightly lowering its price target to $80 from $82, aligning valuation with industry peers.

The analysts concluded, "We believe the market's faith in Nike and new CEO Elliott Hill will keep the stock from falling too much."