Shares of Nike (NKE) are sliding after Cowen analyst John Kernan downgraded the stock to Market Perform, saying that the company’s share loss to Under Armour (UA) and Adidas (ADDYY) could accelerate.

SHARE LOSS TO COMPETITORS: In a research note to investors, Cowen’s Kernan downgraded Nike to Market Perform from Outperform, saying that the potential exists for market share losses to competitors Under Armour and Adidas to accelerate, while promotions in North American and international inventory appear elevated. According to the Cowen Consumer Tracker survey, Nike brand preference in the apparel category has declined from 55% to 44%, with Under Armour and Adidas gaining among 18 to 34 year old male and females, he noted.

RISK TO GUIDANCE: Kernan also noted that he sees a “high probability” of Nike reducing second half of 2017 guidance or of guiding third quarter below consensus. The analyst said he believes rebalancing supply and demand in North America has not taken effect and Nike’s guidance for sales to exceed futures in the remainder of the year is at risk, with apparel being the biggest risk category. Nonetheless, he acknowledged that sentiment among investors he has talked to is mixed, with a few expecting a guidance revision but many others still bullish on valuation and long-term prospects. Kernan lowered his price target on Nike’s shares to $54 from $59.

WHAT’S NOTABLE: Yesterday, Under Armour, Fanatics and Major League Baseball announced a 10-year partnership that names the athletic wear maker as the official uniform provider to MLB. This represents Under Armour’s first-ever professional league uniform deal.

PRICE ACTION: In late morning trading, shares of Nike have dropped almost 3% to $50.44, while Under Armour shares have risen about 1% to $30.79.

 

Print Friendly, PDF & Email