Nike (NKE) notched one of its worst days this decade after reporting earnings on Thursday evening.
The shares plunged 6.61% in Friday trading, the second worst decline in two years and the fifth biggest one-day drop in a decade.
While there was no glaring hole in the company's results, in fact the company recorded a beat on top and bottom-line earnings results, the market appears to have pinpointed pain points of weakness.
First, many feel the guidance is conservative. The anxiety over a slowdown, a much feared buzzword in the current environment, was only exacerbated by North American sales coming in well below analyst estimates.
The company offered the explanation that timing of releases in the company's NBA products were to blame for the miss, eschewing any implication of decelerating demand or encroaching competition from Adidas (ADDYY) or Under Armour (UA) .
The explanation seems to have done little to placate a sell-heavy market, happy to dump the sneaker company that had begun to command a hefty P/E ratio after an over 30% rise from its trough on Dec. 20.
Buying Opportunity?
Amid the slide, the analyst community consistently advised picking up shares at what they saw as significantly discounted values.
"Early in 2019 we identified NKE as a top pick for the year," Oppenheimer analyst Brian Nagel wrote in a note on Friday morning. "We very much stick by that call and recommend clients use any "sell on the news" weakness in shares as an incremental buying opportunity."
He explained that short-term noise on the timing of certain NBA-related releases is obscuring the long-term view of a company that dominates its domain and should continue to do so as global, digital efforts continue to look good.
"In our view, Nike represents an already dominant, legacy global brand that is now aggressively embracing the power of digital to enhance almost all facets of its business model," Nagel said. "We look on upbeat Street forecasts and guidance as at least do-able and supportive of a premium valuation. Our call on NKE is longer term in nature and not necessarily pegged to near-term data points."
Based on his bullish outlook, he set a 12 to 18-month price target at $100 per share, which would imply the first time Nike stock has ever touched triple digits.
Nagel was far from an outlier in his advice to clients.
"The [fourth fiscal quarter] guide will likely be beat and the preliminary 2020 guide came in generally as expected as well," Wedbush analyst Chris Svezia commented, quelling primary concerns on guidance. "2X and Consumer Direct Offense initiatives are generating positive results and accumulating NKE shares on weakness is recommended."
Svezia set his price target at $96 per share on the back of his bull case.
Counter-intuitively, it may seem, over 50% of analysts polled by FactSet raised price targets based on the quarterly report and commentary from executives.
The change in estimates along Wall Street has actually raised the consensus price target from about $89 prior to the call, to just over $91 per share after.
Smashed By Sentiment
In the end, the bargain touted by analysts was not enough to bring in buyers, leaving many investors angry amid March's market madness.
On a day when recession fears fomented market momentum to the downside, dragging down the Dow by over 450 points, maybe that's not a big surprise.
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