JPMorgan Downgrades Nike to Underweight, Citing Prolonged Turnaround Pain

JPMorgan has downgraded Nike (NKE) to Underweight from a neutral stance, arguing that the athletic apparel giant's turnaround strategy will create significant earnings headwinds through fiscal 2028. The bank's analysts also cut their price target on the stock to $40 from $47, a move that sent shares down 3.11% in pre-market trading.

The Rationale Behind the Downgrade

According to the research note issued on August 4, JPMorgan believes the market is underestimating the financial impact and extended timeline of Nike's strategic shifts. The bank projects Nike's earnings per share (EPS) will remain significantly below Wall Street consensus for the next several years.

Key forecasts from the bank include:

• FY27 EPS: $1.55, approximately 10% below the Street's consensus.
• FY28 EPS: $1.72, nearly 20% below consensus.

Analysts highlighted two primary drags on performance: a major online reset in China and ongoing store closures in North America. The termination of a 27-year partnership with distributor Topsports is expected to create an annual revenue headwind of over $1 billion in China starting in January 2027, representing about 20% of the region's revenue.

A Contrarian Stance on Wall Street

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JPMorgan's bearish call places it in a small minority among analysts covering Nike. The current consensus includes 12 Buy ratings and 25 Hold ratings, compared to just two Sell-equivalent ratings, including JPMorgan's new Underweight stance.

Other major investment banks maintain significantly higher price targets, with firms like RBC Capital Markets at $90 and Morgan Stanley at $72. This wide disparity suggests the broader market has priced in a recovery that JPMorgan's analysis does not foresee in the near term.

Mounting Headwinds and Potential Catalysts

The downgrade comes amid mounting evidence of challenges for the brand. A recent Morgan Stanley survey indicated that Nike's preference share for athletic footwear has declined for the fifth consecutive year, while rivals like On Holding (ONON) are gaining ground. This follows a period of weak financial results for Nike, including a reported 12% year-over-year decline in revenue and a 26% drop in digital sales.

However, investors bullish on the stock point to CEO Elliott Hill's "Win Now" restructuring plan as a credible path to recovery. An upcoming investor day in November is seen as a key potential catalyst, where management is expected to present a three-year financial roadmap that could reassure the market and potentially force a reevaluation of the bearish thesis.