Nike (NYSE: NKE) Earnings Preview – Tough Quarter Amid Rising Competition. TD Cohen Lowers Price Target

Nike stock (NYSE: NKE) took a dip in yesterday's session, losing 2.5% in anticipation of what is potentially a tough upcoming earnings announcement tomorrow (27th). Markets are bracing for a challenging quarterly report as the sportswear giant is anticipated to reveal its slowest revenue growth in two years. After 3 consecutive quarterly beats, the reaction is expected to be notable.

The expectation into earnings is for an EPS of 0.84, against revenues of $12.86bn. TD Cohen have revised down their price target for Nike stock ahead of earnings, releasing an adjusted mark of $89 (down from $91) this morning. They see a deteriorating trend from the last guidance in March, and expect the outlook for H1 2025 to be lacking in upside.

The market prepares for new figures that may expose vulnerabilities in Nike's performance amidst burgeoning competition from emerging athletic brands such as Deckers' Hoka and Roger Federer-backed On.

Several brokerage firms have downgraded their price targets for the Oregon-based company, pointing to the rising appeal of brands like Hoka and On that continue to lure customers with their innovative and dynamic image.

For the upcoming Olympic Games in Paris, Nike plans to concentrate their marketing strategy around high-profile performance products. The Alphalpy 3 racer and the Pegasus running shoe are positioned to spearhead this attempt to recapture market attention.

A significant pivot in Nike's route to market, transitioning from wholesale to a direct-to-customer model, seems not to have paid off as planned, leading to exacerbated issues in demand. Illustrative of this consumer shift, On and Hoka have reported an uptick in market share at retailer Dick's Sporting Goods, further troubling news for Nike's position in the market.

In response to the heated competition from the upstart brands, Nike has kicked off a $2 billion cost-saving plan spread over three years. The strategy includes scaling back on some of its staple sneaker lines, such as the Air Force 1.

Financial projections for Nike's fourth-quarter revenue suggest a mere 0.2% increase, bringing it to $12.85 billion. However, earnings seem more optimistic with analysts expecting adjusted earnings to grow by 26.4% to 83 cents per share year-over-year.

Despite forecasting sales challenges, Nike's stock rating remains generally robust among analysts, with an average “buy” rating. Of 40 analysts, 25 rate the stock “buy” or higher, three advise “sell,” and 12 hold a “hold” position.

In a tumultuous year, shares of Nike have seen an almost 12% decline since the beginning of the year, reflecting the broad consumer and investor sentiment as the company faces one of its most strenuous periods. The anticipation for the fourth-quarter results holds not only the key to understanding Nike's current market dynamics but also posits questions on the company's strategy moving forward in an increasingly competitive industry.