NKE Sales, Multiple to Compress, Analyst Says

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Forbes.com, Spring, 2012. This article was placed on behalf of the U.S. based equity research effort of institutional broker and investment bank Canaccord Genuity. It was part of a series of articles developed under an agreement with forbes.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week. The site, forbes.com is one of the top 500 sites in the world with nearly 10 million subscribers and approximately 100 million page views a month.

Citing an inventory build and other factors, Canaccord Genuity consumer analyst Camilo Lyon believes a sales slowdown may occur at Nike (NKE) and, in combination with multiple compression, the downside risk to the stock a price of $95. He said:

“Decelerating sales over the next three to four quarters, the potential for excess inventory post the Euro Champs/Olympic sporting events, and unit declines in H2/13 will result in multiple compression. As such, we believe the risk/reward is skewing to the downside.”

He noted, “Over the last 11 years, inventory growth has never outpaced sales growth as much as it has in the last four quarters. This is concerning to us particularly heading into the Olympics and Euro Champs, where we would expect NKE to increase its inventory position.”