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Piper Jaffray Downgrades Nike As Adidas And Others Have Hurt Its Growth

Nike, Inc. NYSE:NKE, ADIDAS AG ADDYY - Piper Jaffray Downgrades Nike As Adidas And Others Have Hurt Its Growth

Nike Inc NKE 2.32% was downgraded to Neutral from Overweight (with a $58 price target) by analysts at Piper Jaffray.

According to Piper Jaffray's Erinn Murphy, a downgrade justified following an on the ground fact finding mission across Europe, including meeting with Foot Locker, Inc. FL 0.66%'s German and UK management teams and other clothing and fashion retailers. The analyst also visited Nike's flagship store in London and the Nike Women's Running concept.

Murphy noted that the main takeaway from the visit to Europe was that the "resurgence" Adidas ADDYY 1.46% has "taken a toll" on Nike's growth rates in the region. Specifically, the brand is now seeing "multiple platforms working" including the Super Star/Stan Smith, Gazelle, NMD and Ultra Boost.

Meanwhile, Puma is "starting to make a comeback", New Balance and Reebok are "having successes in the retroing" of their styles and Under Armour Inc UA 1.4% is "making solid strides."

The analyst also observed that a portion of Nike's footwear were being marked down in stores that sell multiple athletic concepts. This may be of concern considering the analyst didn't see similar markdowns in Adidas, Puma, Asics and Under Armour shoes and may be due to the fact that Nike is working through inventory in the region.

Murphy also suggested Nike's pipeline moving forward is "more muted" in terms of innovation and this could "weigh on Nike" for the next 6 to 12 months.

"We are stepping to the sidelines and expect Nike shares to be in a period of digestion until we see evidence of new platform innovation and earnings acceleration," the analyst concluded.

DateFirmActionFromTo
Sep 2016PiperJaffrayDowngradesOverweightNeutral
Aug 2016B. RileyDowngradesBuyNeutral
Jun 2016StifelMaintainsBuy

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