Bank of America (BofA) downgraded Nike (NYSE:NKE) to an "Underperform" rating from "Neutral," significantly cutting its price target to $30 from $47. This implies a potential downside of nearly 17% from the stock's previous close. The downgrade reflects growing concerns about Nike's turnaround strategy, with analyst Lorraine Hutchinson highlighting rising risks, particularly in the company's struggling "classics business" and a lack of innovation. This sentiment is shared by other analysts, as Nike has received five downgrades since the beginning of August, with 26 out of 44 analysts now rating the stock as a "Hold," according to LSEG data.
BofA now forecasts negative sales growth for Nike through fiscal year 2027, a reversal from its earlier expectation of a spring recovery. The bank also reduced its earnings per share (EPS) estimates for fiscal years 2027 and 2028 by 11% and 12%, respectively, with its fiscal 2027 EPS estimate now 14% below the Visible Alpha consensus. The downgrade also noted that Nike's dividend payout ratio is over 100%, leading to a reduction in its income rating from 7 to 8.
Key challenges cited include a tougher demand backdrop in China, a critical market where Nike's reduction in partner online sales is expected to lead to promotional pressure through the second quarter. Additionally, North American wholesale sales, which previously showed strength with 14% growth in fiscal 2026, are now projected to decline starting in the second quarter of fiscal 2027 and remain challenging. The report also indicated that product newness is failing to resonate, and excess inventory is building amidst low demand. Nike's stock has already fallen 47% over the past year, significantly underperforming the S&P 500's 12% gain year-to-date.
