JPMorgan has downgraded Nike’s stock rating to ‘underweight’ due to its lengthy turnaround plan, which is now expected to impact financials well into FY28. The bank also cut its price target to $40.
The sportswear company faces headwinds in key markets like China and North America, where it’s reducing its physical store presence. Investors await Nike’s November Investor Day for more clarity on its multi-year strategy.
READ MORE FROM CNBC
JPMorgan has turned bearish on sportswear giant Nike (NKE), downgrading its stock rating to 'underweight' from 'neutral' due to concerns over the prolonged timeline of its turnaround strategy. The bank also slashed its price target for Nike shares to $40, signaling a potential 6% decline from Monday's closing price.
Analyst Matthew Boss, in a note released Tuesday, highlighted that Nike's 'Win Now' turnaround plan is expected to exert pressure on the company's balance sheet for the next few years. "A key clarification from our recent mgmt access (& filings) - the financial impact of 'Win Now' decisions made through the end of calendar year 2026 will linger and impact NKE's P&L in 2H27 and into FY28," Boss stated.
Nike is also contending with headwinds in key international markets. In China, the company has experienced a recent decline in sales. Furthermore, Boss estimates that Nike will face a $1 billion revenue headwind as it revamps its digital marketplace presence in the region.
Domestically, Nike faces forward revenue challenges in North America as it plans to reduce its U.S. store footprint by approximately 10%. Boss noted that the financial implications of these store closures will persist until they are fully annualized, likely around July 2027.
Investors are now anticipating Nike's upcoming Investor Day in November, where the company is expected to lay out a detailed three-year plan for fiscal years 2027 through 2030. While Boss projects that Nike will emerge from its current difficulties by the beginning of the next decade, he suggests that the company may not regain the high growth rates it once achieved.
Shares of Nike were down more than 3% in premarket trading on Tuesday. The broader analyst sentiment towards Nike remains cautious, with 25 out of 42 covering analysts rating the stock as a 'hold', and an additional two assigning an 'underperform-equivalent' rating.
