Nike, Inc. (NKE) investors were hoping to start this week off on the right foot, but they got yet another piece of bad news on Monday morning. Jefferies analyst Randal Konik downgraded Nike stock from “buy” to “hold,” noting increasing competition from Adidas and Nike stock’s premium market valuation.
“The athletic footwear cycle and Nike brand power are strong, but the competitive landscape should make share gains and margin expansion elusive,” Konik says in a statement, according to CNBC.
The primary factor behind the downgrade was the latest batch of NPD Group data, which reveals that Nike has lost 1.2 percent of market share in the past year, while Adidas has gained 5 percent. Data from Alexa also indicates more traffic flowing to Adidas’ websites, while Nike’s website traffic has been on the decline.
Nike shares are now down more than 9 percent in the past 12 months. The stock dropped another 2.8 percent in early Monday trading after a 4.3 percent sell-off on Friday following Foot Locker (FL) earnings. Foot Locker’s disappointing earnings and guidance sent its stock tumbling nearly 28 percent on Friday, dragging down the entire athletic apparel group.
Despite the downgrade, Konik says there is still plenty of “industry tailwinds” in the athletic footwear market and Nike’s issues may be short-lived if it can unearth yet another hit product.
“Nike innovation is strong, but there’s less buzz around its near-term pipeline,” Konik says.
On Monday, Buckingham Research Group analyst Scott Krasik also says investors may be overreacting to a short-term “pause” in Nike’s premium basketball business.
“Importantly, we do not think premium athletic footwear is facing a commoditization of the category (i.e., athletic apparel) nor do we see major channel and/or competitive shifts to Amazon or others, both of which would be more concerning,” Krasik says in a note to clients.
In addition to the downgrade, Jefferies lowered…
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