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HSBC: Nike's valuation relative to growth not as compelling here

Key Points
  • Nike downgraded to "hold" at HSBC, price target remains $62.
  • "US footprint shift could remain painful and valuation relative to
    growth (and to Adidas) not as compelling here," writes analyst Erwan Rambourg.
  • Nike shareholder & "Halftime Report" trader Jim Lebenthal says it's not yet time to sell the stock.

Nike is up more than seventeen percent this year, and one analyst believes the stock may have run too far, too fast.

On Tuesday HSBC analyst Erwan Rambourg downgraded the stock to "hold" on valuation concerns.

While he believes the company has a "compelling future" and that sentiment around the stock is once again positive, he thinks the "valuation relative to growth (and to Adidas)" is no longer compelling.

He also cited "lower growth in the US" and an "uncertain" present as reasons for the downgrade. He did, however, leave his price target unchanged at sixty two dollars.

Nike cut to "hold" at HSBC

"Halftime Report" traders Jim Lebenthal and Kourtney Gibson both own the stock, and agree that it's not yet time to sell.

Lebenthal believes there's "three to four more points in it [Nike], and maybe one more month before this call is right. He [the analyst] is going to be right, he's just a touch early," Lebenthal said of Rambourg's downgrade.

While Lebenthal isn't selling the stock here, he agrees with Rambourg's call that Nike's current multiple -- 25X forward price-to-earnings -- is "expensive" and perhaps unjustified given the company's slowing growth.

"The bulls, like me, will say that it's always expensive, that it's always a mid-20s multiple...that was based on its growth rate three, four, five years ago that was a lot bigger than it is now. That was before Adidas started kicking its fanny, and Adidas is continuing to do so," he said on Tuesday's "Halftime Report."

Like Lebenthal, Loop Capital President Kourtney Gibson believes the call is too early. The levels she's watching are $60-$62 to start dipping down, and $64-$65 to think about selling the position. The stock closed at $59.48 on Monday.

Gibson also noted that before Christmas -- traditionally the strongest season for retailers -- is not the time to sell the stock, so she's "holding it for now."

Jim Lebenthal and Kourtney Gibson own Nike.