Wells Fargo Lowers Price Target for Nike Inc

Investing.com — Wells Fargo has reduced its price target for Nike Inc (NYSE:NKE) from $95 to $92. The bank cites ongoing challenges for the sportswear giant stemming from weak direct-to-consumer sales, cuts in orders for key products, and increased promotional activities.

Revenue and Earnings Estimates

The bank has also lowered its revenue and earnings expectations below Wall Street's consensus. For fiscal year 2024, EPS is projected at $2.50, compared to the analysts' average estimate of $2.71.

Factors Impacting Estimates

Wells Fargo highlighted weaker-than-expected holiday markdowns and sluggish demand for popular franchises such as Air Jordan 1 and Air Force 1. Additionally, currency exchange headwinds have intensified, with suggestions from supplier checks that current "Franchise Management" initiatives could extend into 2025.

Sales Performance

Nike's direct-to-consumer sales experienced a 24% year-over-year decline in the second quarter. The drop in traffic and resale premiums on platforms like StockX demonstrates a similar trend of steep declines. The bank noted that the new leadership's inventory reset strategy might prolong the company's turnaround into 2025.

Brand Heat and Marketing Buzz

The report pointed out a decline in brand reception as well, with 2Q social media mentions decreasing by -13% on Instagram and -37% on TikTok. This indicates that recent product launches and marketing efforts have not significantly boosted Nike's performance yet.

Rating and Long-Term Prospects

Despite these challenges, Wells Fargo has maintained its "overweight" rating on Nike, optimistic about the company's long-term prospects once strategic changes begin to take effect.