TLDR
- Nike stock rose 5% after Jefferies upgraded it to “buy” with a $115 price target
- CEO Elliott Hill is addressing product and distribution issues head-on
- Jefferies expects a “V-shaped” recovery with EPS reaching $3.50 by fiscal 2027
- Nike’s brand remains strong despite losing market share due to strategic missteps
- Nike recently partnered with Kim Kardashian on NikeSkims, targeting the women’s market
Nike (NKE) shares jumped more than 5% on Monday following a positive review from investment bank Jefferies, which upgraded the sportswear giant from “hold” to “buy” and more than doubled its price target from $75 to $115. Analysts led by Randal Konik made Nike a top pick, citing CEO Elliott Hill’s aggressive approach to solving the company’s production and distribution problems.
The endorsement comes after a challenging period for Nike, which saw its stock drop 60% from its 2021 high point amid declining global sales and strained relationships with major retailers. Despite these setbacks, Jefferies analysts believe Nike’s core brand remains robust, suggesting that recent troubles were “self-inflicted” rather than the result of competitive pressure.
Jefferies expects Nike to achieve a dramatic “V-shaped” recovery in profit margins and earnings per share. The analysts project EPS of $3.50 in fiscal year 2027, substantially higher than the current consensus estimate of $2.95. This represents a notable improvement from the projected $2.08 EPS for fiscal year 2025.
- The optimistic outlook is based on Hill’s strategy of prioritizing wholesale partnerships and driving product innovation. This approach mirrors a successful playbook from a decade ago, which analysts believe will help accelerate unit volumes and allow Nike to sell more products at full price.
Market share has been a concern for Nike recently. The company has lost ground due to strategic missteps, including reduced emphasis on product innovation. However, Jefferies believes Nike can stabilize its share of the athletic footwear market in the low to mid-20% range moving forward.
The company’s global distribution advantage remains a key strength that can support growth. Jefferies projects that Nike can achieve a compound annual growth rate of approximately 7%, which is more than double the average analyst estimate of about 3%.
Nike’s new management team under Hill is expected to improve product direction. This leadership shift could be pivotal in helping the company’s financial results surpass market expectations by fiscal year 2027, according to Jefferies’ analysis.
Current analyst consensus shows expectations of Nike’s earnings per share dropping to $2.06 this year from $3.73 last year. However, estimates suggest a rebound to $2.43 in 2026, aligned with the recovery narrative but still below Jefferies’ more bullish projections.
Stock has shown early signs of recovery
The stock has shown early signs of recovery, climbing 6% over the past month and 1% over the last three months. Monday’s 5% jump suggests investors may be gaining confidence in the turnaround strategy.
As part of its recovery efforts, Nike announced a notable partnership earlier this month with Kim Kardashian to create NikeSkims, a new shoe and athletic wear line targeting women. This marks the first time Nike has collaborated with an existing outside firm to launch a brand.
The women’s market represents a major growth opportunity for Nike. In fiscal year 2024, the company generated more than $8.5 billion in revenue from female apparel, less than half the $20.8 billion it earned from male apparel.
This gender gap highlights an area where Nike could potentially expand its market share. The NikeSkims partnership appears to be a strategic move to strengthen the company’s position in the women’s athletic wear segment.
The focus on restoring wholesale partnerships represents a shift from Nike’s previous strategy, which had prioritized direct-to-consumer sales. This realignment could help the company rebuild relationships with key retail partners that had been strained in recent years.
Product innovation, another pillar of Hill’s turnaround plan, has historically been a core strength for Nike. Renewed emphasis in this area could help the company regain its competitive edge in the athletic footwear and apparel markets.
While Nike faces continued challenges, Jefferies’ upgraded rating to “buy” with a $115 price target signals growing confidence that CEO Elliott Hill’s turnaround strategy is on the right track to restore the company’s market position and financial performance.
Nike stock jumped 5% after Jefferies upgraded it to a “buy” rating and more than doubled its price target to $115, citing CEO Elliott Hill’s strategy to restore wholesale partnerships and drive innovation.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
