Nike (NYSE: NKE) is no longer an attractive investment after its recent rally, according to one Wall Street firm.
HSBC lowered its rating to hold from buy for Nike shares, citing weakness in the U.S. market and the stock's valuation.
The company's shares are up 17% year to date through Monday compared with the S&P 500's 16% return. The stock is up more than 10% since Nike gave mid-teens annual earnings per share growth guidance for the next five years during its investor day last month.
"Nike management provided insight into a compelling future at investor day but the present is tricky and shares have done well," the HSBC analyst wrote in a note to clients Tuesday.
"We have cut estimates short term to take into account lower growth in the U.S. but have not changed our FY May 2020 estimates or our target price… This implies little upside, hence our downgrade."
The analyst reaffirmed his $62 price target for Nike shares, representing 4% upside from Monday's close.
The analyst reduced his Nike 2018 earnings per share estimate to $2.46 from $2.60 and lowered his sales forecast to $36.3 billion from $36.8 billion for the same year.
HSBC also noted how Nike's forward price to earnings multiple now matches adidas even though it is growing more slowly than its competitor.
The company's "valuation relative to growth (and to adidas) [is] not as compelling here, we believe," the analyst wrote.
Nike shares were trading mid-morning Tuesday down 41 cents to $59.22.
