Nike May Lose a Step

Nike ( NKE : NYSE) By Sterne, Agee & Leach ($96.12, Nov. 14, 2014)

We are downgrading nike air max shoes to Neutral from Buy. The stock is priced for perfection and trading above our prior price target of $95.

Current trends are robust and management is making the right moves. Nike (ticker: nike air max 90 on sale) will continue to gain share worldwide due to the ongoing product innovation and massive dollars dedicated to research and development, marketing, and infrastructure. However, such attributes are currently well understood by investors and embedded in consensus estimates and the stock price. The stock may inch up, but we can no longer recommend putting new money to work.

Since Sept. 27, 2013, the stock has increased 35% versus 20.5% for the S&P 500 Index and 15.4% for the DJIA (of which nike air max online is a component). The stock is currently trading at around 23 times our fiscal 2016 earnings-per-share estimate of $4.15 (consensus is $4.14). Over the past five years, the average out-year price-to-earnings multiple is 18.1 times. We contend that a healthy amount of optimism is already embedded in consensus estimates, which call for EPS growth of 21% in fiscal 2015 (a World Cup year) and 15% in fiscal 2016. In addition, consensus estimates call for earnings before interest and taxes percentage to surpass all-time peak levels. Given the strong appreciation in the nike air max 90 stock price in the past three months, we believe buy-side expectations are likely above that of consensus estimates.

We believe that Nike’s strength, driven by innovative marketing, as well as its industry-leading return on invested capital of 26%, are priced in. In addition to the aforementioned fair multiple at which the stock is currently trading, sentiment is extremely positive. Of the 31 firms that currently cover nike air max 2014, 22 have Buys and nine have Neutrals. However, the average price target is $96.70, indicating that despite the rating, most fundamentally believe the stock is fairly valued.

Large retailers, which recently previewed back-to-school 2015 products, are very positive. Ongoing revenue growth in North America will be driven by investments in shops, at major retailers, which allows nike flyknit air max 2014 to meticulously carve out and exploit key segments of the business. The recent acceleration in Europe is coming from segmenting the market on a good, better, best basis as well as carefully segmenting key categories.