Investors expected to be dazzled by quarterly earnings from the world's biggest maker of athletic footwear. Instead, they were disappointed as Nike (NKE) posted revenue below expectations.
Nike late Tuesday reported sales of $8.03 billion in its most recent quarter, beneath expectations of $8.2 billion. Not surprisingly, Nike's shares -- up more than 113 percent during the last three years -- dropped sharply in the wake of the news, ending Wednesday's session at $62.44, down nearly 4 percent.
Adding insult to injury, Nike projected high single-digit percentage revenue growth in its next fiscal year, well below the 10 percent gain Wall Street anticipated.
Analysts say given the company's high valuation, the earnings bar was set high.
"Revenues were a bit of a miss and the forward guidance was a bit conservative," Christopher Svezia, an analyst with Susquehanna International Group, said. "Nike being who they are and (given) the valuation of the stock you need to have perfection."
Basketball is one business line where Nike's growth has slowed in the U.S. Demand for lines backed by NBA superstars LeBron James and Kevin Durant has been hurt by the surging popularity of Under Armour's (UA) Stephen Curry line. Curry plays for the defending NBA Champions, the Golden State Warriors, who are dominating the league again this year.
Converse is another weakness for Nike. Third-quarter revenue fell 5 percent on a currency neutral basis.
Still, Wall Street hasn't lost faith, with the average 52-week price target for Nike's stock at $71.24, about 15 percent higher than where it currently trades.
Analysts note that the company's fundamentals remain strong though like other multinationals its bottom line has been hurt by the strong dollar.
Nike is also expected to benefit from this summer's Olympics in Brazil, the NBA Playoffs and the European Football Championship.
China is another plus for Nike even as other companies warn they've been hurt by the country's slowing growth rate. Nike's revenue from China rose 23 percent, while North America gained 13 percent and Western Europe rose 12 percent.
"The athletic category remains very healthy, and we see Nike continuing to gain share given its relentless reinvestment of profits back into product innovation and brand building," Omar Saad, an analyst with Evercore ISI, wrote in a note to clients.
Nike also has plenty of tricks up its sleeve to boost sales such as its new self-tying shoes and mobile App that provides coaching and access to Nike products in one spot. However, whether the company will continue to "Just Do It" at levels Wall Street has grown accustomed to is tough to say.