Nike Inc. (NKE) might be moving too fast for its own good. That's the view from Needham analyst Tom Nikic, who just downgraded the athletic wear giant from Buy to Hold while keeping his $68 price target intact.
The issue? Nike has been flooding the North American wholesale channel with product as part of its turnaround strategy. But according to Nikic, the company's "brand heat" simply isn't strong enough to support that level of inventory push. Translation: stores might end up stuck with Nike shoes they can't sell, which creates problems for everyone involved.
It gets worse. Nike is also dealing with serious headwinds in China and struggling with its Converse brand. "The timeline to get those businesses back on track is uncertain at best," Nikic wrote in his note.
The analyst thinks Wall Street is being way too optimistic about how quickly Nike can turn things around. Consensus estimates appear "too aggressive on the pace of recovery," he noted, suggesting disappointment could be coming.
Interestingly, Nike shares have actually performed well recently, climbing nearly 15% from their post-earnings bottom. That's significantly better than the S&P 500's measly 1% gain over the same period. At publication Friday, shares were essentially flat at $65.26.
