- NKE
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This article first appeared on GuruFocus.
Nike (NKE) is facing a tougher road back to growth which downgraded the stock to Underperform from Neutral and cut its price target sharply to $30 from $47
Analyst Lorraine Hutchinson said Nike’s turnaround is taking longer to materialize as weakness in its larger lifestyle categories outweighs progress from newer product launches.
The $30 target implies roughly 17% downside from Nike’s latest close.
BofA also cut its fiscal 2027 and 2028 earnings-per-share estimates by 11% and 12%, respectively, to $1.43 and $1.87. The bank now expects negative sales growth through fiscal 2027, effectively pushing a meaningful top-line recovery into fiscal 2028.
One of the biggest concerns is North American wholesale.
BofA said recent wholesale growth has not been matched by strong sell-through at retail. Declines in classic styles and weaker performance from some newer launches could put forward order books at risk as retailers become more cautious about future purchases.
China remains another major pressure point.
Nike’s Greater China sales fell 17% in the latest quarter, while a planned reduction in distribution through e-commerce partners could create additional near-term weakness.
The earnings setup is becoming increasingly dependent on gross-margin recovery and cost control rather than sales growth.
BofA also flagged Nike’s dividend coverage. Its fiscal 2027 estimates imply a payout ratio of roughly 107%, meaning projected earnings would not fully cover the dividend.
Investor takeaway
For Nike investors, the downgrade shifts the debate from how quickly the turnaround arrives to whether it slips materially further into the future.
The most important metrics are North American sell-through, China sales, gross margin and retailer order trends.
If lifestyle demand stabilizes and newer products gain traction, Nike could start rebuilding growth expectations.
But BofA sees limited evidence of that happening soon. With negative sales growth now expected through fiscal 2027 and dividend coverage stretched, the bank believes valuation could compress further before the turnaround becomes visible.
