Nike’s
(NKE) shares
roughly
doubled
their
year-to-date
decline
with
a
12%
tumble
in
June
27
aftermarket
trading,
as
persistent
sales
weakness
has
added
uncertainty
to
the
firm’s
turnaround.
Although
the
firm
warned
of
a
difficult
demand
environment
for
sportswear
and
we
lowered
our
estimates,
market
conditions
are
more
challenging
than
expected.
After
posting
flat
sales
growth
in
(May-ended)
fiscal
2024,
Nike
guided
to
a
mid-single-digit-percentage
sales
decline
for
fiscal
2025.
Given
that
we
projected
1%
sales
growth,
we
expect
to
reduce
our
fair
value
estimate
of
$129
per
share
by
a
low-single-digit
percentage.
Even
so,
we
regard
the
share
price
weakness
as
an
opportunity
for
long-term
investors,
since
the
sportswear
leader
stands
to
benefit
from
its
planned
marketing
and
product
initiatives
and
the
growth
of
the
global
market
over
the
next
few
years.
Nike’s
13.3%
EBIT
margin
in
its
fiscal
2024
fourth
quarter
beat
our
estimate
by
80
basis
points
and
led
to
earnings
per
share
of
$0.99,
which
eclipsed
our
forecast
by
$0.11.
However,
this
outperformance
was
mainly
driven
by
a
9%
reduction
in
overhead
expenses
and
was
overshadowed
by
the
quarter’s
2%
sales
decline,
short
of
our
estimate
for
a
minimal
(1%)
gain.
The
firm
attributed
the
slow
sales
to
a
few
areas,
including
digital
(down
10%),
lifestyle
products,
some
footwear,
and
uneven
demand
in
key
markets.
Key
Morningstar
Metrics
for
Nike
• Fair
Value
Estimate:
$129.00;
• Morningstar
Rating:
4
stars;
• Morningstar
Economic
Moat
Rating:
Wide;
• Morningstar
Uncertainty
Rating:
Medium.
Nike
Stock
vs
Morningstar
Fair
Value
Estimate
Source:
Morningstar
Direct
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