Key Takeaways
- Bank of America downgraded Nike from Neutral to Underperform, sending shares down over 2% in Friday’s premarket session.
- The firm slashed its price target from $47 to $30, suggesting approximately 17% downside from Nike’s previous closing price.
- EPS projections for fiscal 2027 and 2028 were reduced by 11% and 12% respectively, with negative sales growth anticipated through fiscal 2027.
- Wholesale momentum in North America is showing signs of deterioration as sell-through performance trails sell-in rates, particularly for classic product lines.
- Greater China revenue plunged 17% in the latest quarter, with additional headwinds expected from reduced online partner distribution channels.
Nike experienced a decline exceeding 2% during Friday’s premarket session following a rating downgrade from Bank of America, which shifted its stance from Neutral to Underperform.
BofA analyst Lorraine Hutchinson dramatically reduced the firm’s price objective to $30 from the previous $47 mark. This revised target represents roughly 17% potential downside from where Nike shares last settled.
The financial institution now anticipates Nike’s sales revival will extend into fiscal 2028. This marks a significant shift from BofA’s earlier projections, which had forecasted a recovery commencing much sooner.
The firm reduced its earnings per share projection for fiscal 2027 by 11% and trimmed its fiscal 2028 forecast by 12%. The updated fiscal 2027 estimate now stands 14% beneath the Visible Alpha consensus figure.
North American Wholesale Momentum Fading
The wholesale channel in North America had emerged as one of Nike‘s few growth drivers, expanding 14% during fiscal 2026 even as overall revenue remained stagnant. According to BofA, this positive momentum appears to be losing steam.
Current data shows sell-through rates falling behind sell-in figures, indicating retailers are experiencing difficulty moving inventory at the pace Nike delivers it. Heritage products are experiencing softness, while certain fresh launches are failing to connect with consumers.
This dynamic could prompt retailers to adopt a more conservative ordering approach. BofA projects North American wholesale revenue will begin contracting in the second quarter and persist through the remainder of fiscal 2027.
Chinese Market Continues to Struggle
Revenue from Nike’s Greater China segment contracted 17% during the most recent reporting period. Following a research visit to China, BofA’s Luxury Goods analysts returned with concerning observations.
The team identified sluggish athletic wear demand and new product offerings that aren’t connecting with Chinese shoppers. Running category growth is decelerating, while surplus inventory accumulates amid weakening consumer interest.
Additionally, Nike is reducing its footprint with online distribution partners throughout China. BofA anticipates this strategic shift will generate heightened promotional activity through the second quarter before enabling Nike to establish a more unified brand presence in digital channels.
The stock has endured significant pressure throughout the current year beyond today’s movement. Nike shares have tumbled 44% year to date, sharply underperforming the S&P 500’s 12% advance.
According to BofA, this selloff already incorporates a 40% reduction to fiscal 2027 earnings estimates during the same timeframe. The firm’s analysts question whether the stock can sustain a premium valuation multiple if earnings projections continue facing downward revisions.
One bright spot exists on the cost front. Tariff assessments on Nike merchandise currently range from 10% to 12.5%, representing a decrease from approximately 20% twelve months earlier.
BofA anticipates Nike’s recently appointed CFO will prioritize aggressive cost reduction initiatives. Operating expense optimization is viewed as a probable focal point.
The sustainability of Nike’s dividend also emerged as a concern in BofA’s analysis. The firm’s fiscal 2027 projections imply a payout ratio reaching 107%, meaning dividend payments would surpass actual earnings.
This factor contributed to BofA’s decision to lower its income rating on the stock. With revenue under pressure, the bank emphasized that Nike’s earnings trajectory now hinges substantially on gross margin improvement and enhanced operational efficiency.
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