Nike Inc (NYSE:NKE) started the day before the weekend with its laces tied together, as NKE stock dips on a downgrade from B. Riley & Co analysts.
The investment bank knocked NKE down to “neutral” from “buy” in a note Friday morning, suggesting that recent improvements to its basketball segment haven’t been enough to offset the declines in its running business.
NKE stock is trending down as much as a percent on the downgrade.
Should You Sell NKE Stock?
There are, however, still plenty of analysts bullish on NKE stock. Of the 29 analysts covering Nike, eight rate it a strong buy and 14 have a buy rating attached. The rest are holds, or neutral ratings.
A single analyst muting his or her bullishness doesn’t mean run out and sell NKE stock.
Back in June, Morgan Stanley cited three main reasons for its downgrade of NKE (from “overweight” to “equalweight”). They were: a slowdown in apparel, competition from Adidas AG (ADR) (OTCMKTS:ADDYY) and even stiffer competition from Under Armour Inc (NYSE:UA).
Analysts at Stifel, however, recently discussed how both UA and ADDYY are still beneath the reigning king in athletic apparel. It’s really no wonder Rory McIlroy isn’t so keen on trading in his Nike clubs for new sponsorship anytime soon.
Stifel continued to rate NKE stock as a “buy,” maintaining its $68 price target. Nike’s stock is currently trading around $59 after today’s decline, so that leaves over 15% upside from here if Stifel is correct.
This year, Nike stock has shed about 6%, while gaining around 30% in 2015. So is it possible for NKE stock to rise 16% in a year? I think so. After all, its earnings growth rate for the long term is relatively unchanged from the past five years, and it’s expected to pick up the pace from next quarter and on.
In fact, Nike stock was the second-largest purchase of hedge funds in the second quarter, with the top 50 funds buying about $1.3 billion in NKE stock. Today’s decline could be a good dip-buying opportunity, especially if apparel sales pick up.
But if not, at least Nike CEO Mark Parker can take some solace in Kanye West’s apology.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
