Nike (NKE -19.98%) delivered an earnings beat for the quarter, but left investors waiting when it comes to revenue growth.
The market appears to be growing impatient, with Nike shares down 18% as of 10 a.m. ET.
Stuck at the starting line
Nike is a transitional period. The longtime leader in athletic and athleisure apparel has been focused on streamlining operations and investing in future innovation to counter sluggish sales from many of its core brands.
The latest quarter gave little indication the transition is near completion. Nike reported adjusted earnings of $1.01 per share in its fiscal fourth quarter, considerably better than the $0.83 Wall Street had expected. But revenue of $12.6 billion was down year over year and came in about $250 million shy of expectations.
The company also forecasted revenue would fall by mid-single digits in its new fiscal year.
Post earnings, a number of Wall Street analysts downgraded Nike from a buy to a hold rating, and nearly a dozen lowered their price targets on the stock.
Is Nike a buy?
There are promising signs in terms of efficiency, and Nike is expecting a gradual rebound in demand in both North America and the all-important Chinese market in the quarters to come.
The real question is timing. Following the post-earnings call, investors and analysts are resetting expectations toward an elongated timetable and a fiscal 2025 that leaves little to get excited about.
Nike has a powerful brand and world-class distribution system. With Friday's decline, the stock is now trading at about 22 times earnings, which looks attractive for a retailer, assuming the company can restart its growth engine.
It is going to require patience, but for investors who believe in Nike and who are willing to wait out a turnaround, the stock looks attractive at this level.
