Nike Inc. (NKE) stock has some investors upset as March Madness begins.
Shares of the Beaverton, Oregon-based shoe and sportswear manufacturer fell nearly 5% in pre-market trading despite at earnings per share and revenue beat that came largely in line with the Wall Street consensus.
Weak guidance for the full fiscal year 2020 from the company and slower than expected North American sales appear to be the main culprit for stoking the market's ire.
North American sales notched a 7% gain year over year which came in below the expectation of double digit improvement. Executives were quick to reassure investors that the figure was more related to timing of releases rather than any demand deceleration or loss of share to German rivals like Adidas (ADDYY) or Puma (PUMSY) .
"There were some timing impacts related to our NBA business and the launch of certain products year-over-year," CFO Andy Champion told investors on a conference call late Thursday. "There are always timing impacts in terms of product launches. So yes, nothing in terms of a turn or change in consumer demand."
The slowdown in the company's home region seems to have superseded strong sales elsewhere, particularly in the burgeoning Chinese market as well as strong results from digital sales globally.
Nike is seeing growth everywhere but China is the key. Up 19% last "We have great momentum in China, but we are still far from realizing the long-term opportunity in this market," Andrew Campion, Nike's CFO $nke
— Sara Eisen (@SaraEisen) March 22, 2019
While analysts were largely positive on the company's couching of the slowdown and retained bullish long-term outlooks, many also acknowledged that the weaker than expected guidance might move shares downward in the immediate term.
"These results, however, were challenged by sequential comparisons with FY2Q and growth showed slight deceleration in all regions," Stifel analyst Jim Duffy commented on Friday morning. "Paired with FY4Q guidance that disappointed relative published estimates and elevated expectations, we are not surprised by pressure on shares."
Nonetheless, he retained his "Buy" rating and a price target of $96 per share, a price that would represent an all-time high for the stock.
Duffy's contemporaries are largely on the same page, noting that a reassessment may need to take place as the guidance and hiccup in North American sales are digested.
"We do think investors will reassess valuation and the outlook for NKE as 4Q and initial FY20 commentary signal the need to lower estimates slightly," Deutsche Bank analyst Paul Trussell recognized. "That said, we think downside risk is somewhat limited due to NKE's ability to deliver strong revenue, driven by innovative product and international expansion."
Meantime, shares will give up about a month's worth of gains if pre-market losses hold, taking some steam out the stock that has surged nearly 20% year to date.
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