Nike dips as BofA downgrades stock on longer-than-expected turnaround

Investing.com -- Nike shares dipped more than 2% in premarket trading Friday after the bank downgraded the stock to Underperform from Neutral and lowered its price objective to $30 from $47, saying the company’s sales recovery is now likely to be pushed into fiscal 2028 rather than materializing sooner as previously expected.

Analysts led by Lorraine Hutchinson cut fiscal 2027 and 2028 EPS estimates by 11% and 12%, respectively, and now forecast negative sales growth through fiscal 2027, reversing a prior expectation of a spring inflection. The firm’s fiscal 2027 EPS estimate sits 14% below Visible Alpha consensus. BofA also lowered its income rating, citing a dividend payout ratio exceeding 100%.

The new $30 price objective is based on a 16 times price-to-earnings multiple, down from 22 times previously, which the bank said now aligns with the peer average.

The analysts said North America wholesale, an area of recent strength with 14% growth in fiscal 2026 versus flat total sales, is likely to slow as sell-through continues lagging sell-in. They noted that "in some instances, sell-through is lagging sell-in due to declines in classic styles and new launches that are missing expectations," which could make retailers less willing to bet on new product.

BofA models North America wholesale sales declines beginning in the second quarter and continuing through the rest of fiscal 2027.

In China, Nike’s reduction of online partner distribution is expected to create promotional pressure through the second quarter before the company presents its brand more cohesively online. BofA’s Luxury Goods team conducted a China field trip and found weak sports demand, product newness that isn’t resonating with consumers, moderating strength in running, and excess inventory driven by soft demand.

Analysts said the stock’s 44% year-to-date decline, against a 12% gain for the S&P 500, already reflects a 40% cut to its fiscal 2027 EPS estimate over the same period, making it "unlikely that the stock will hold a premium multiple in the face of further EPS cuts." They acknowledged some progress on product innovation, but said those gains "have been dwarfed by weaker larger casual categories."

With sales under pressure, BofA said Nike’s earnings outlook increasingly depends on gross margin expansion and cost control, creating downside risk if execution falls short. The bank sees some margin upside from lower tariffs, with the new rate at 10-12.5% compared with roughly 20% a year ago, and expects Nike’s new CFO to make cost-cutting a key area of focus, including reductions in operating overhead expenses.

Original Article

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