Seeking Alpha It was just over a month ago that I reaffirmed my positive sentiment on Nike (NKE), and expected further growth in the stock heading into the latter half of 2017. However, I may have just jinxed it the price subsequently fell from $59.80 at the time to $53.24 at the time of writing: Among one of the significant reasons for the fall was a downgrade by Morgan Stanley due to slowing sales in the North American region. Specifically, sales are down by a much greater margin than expected since Q4 earnings, and the earnings forecast for Nike has been revised downwards to $2.44 from $2.58. However, is there substance behind such a forecast, or is this yet another buying opportunity? Competition From Adidas Well, it appears that Nike is not without its troubles. Specifically, the company is starting to face significant competition from its European competitor Adidas. For instance, while revenue for Nike grew by just over 6% in 2017, that of Adidas (OTCQX:OTCQX:ADDYY) grew by over 20%. Moreover, this is not simply a nike lab revenue issue as the growth of Adidas has been quite impressive. According to InvestorPlace, 52 of Nike's shoe offerings were in the top 60, which represented 86.6% of the market. However, this has now dropped to 35, which leaves nike pegasus Nike with 58.3% of the market. In contrast, Adidas had only two shoes in the top 60 last year for 3.3% of the market, but this has increased rapidly to 24 for 40%. It's one thing for investors to get concerned when sales are down due to a temporary dip in consumer demand indeed Nike has faced such situations and gotten past them. However, when a competitor appears to be gaining ground at such a fast pace, then this is understandably a cause for concern. sports footwear sales. As a whole, Adidas has seen growth in basic EPS by 14% to 1.72, and gross margins are expected to increase up to 0.8pp to a level of up to 50.0% by the end of 2017. Financials Now, the real question is does the recent gain by Adidas actually matter in nike 05553 the long term? From a financial perspective, I continue to see Nike as the better company. For instance, we see that over a 10 year period, Nike has had a lower debt to equity ratio, a higher cash flow to sales ratio, and a significantly lower P/E ratio since 2016: Debt to Equity Source: Statista 2017 Even with Adidas' gains in the footwear market, we see that it still lags far behind that of Nike, and for this reason I believe the market is overreacting to the recent slump in sales for Nike. To conclude, Nike is financially a better company and a period of lower than expected sales does not imply a long term problem with the company. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.