JPMorgan Downgrades Nike to Underweight, Warns of Earnings Pressure Through FY28

JPMorgan downgraded Nike (NKE) to Underweight from Neutral on Tuesday, warning that the athletic apparel giant's strategic turnaround decisions will create significant financial headwinds through fiscal 2028. The firm's analysts, led by Matthew Boss, stated that Wall Street has not fully priced in the prolonged impact of these operational shifts.

Turnaround Creates Lingering Headwinds

JPMorgan's analysis, based on recent management access and fieldwork, identified two key actions that will weigh on Nike's profit and loss statement. The firm argues that the consequences of these "Win Now" decisions will extend well into the second half of fiscal 2027 and fiscal 2028, contrary to current consensus expectations for an acceleration.

Key pressure points identified by the bank include:

• Greater China: A planned reset of Nike's online marketplace, set to begin in January 2027, is expected to create an "unmitigated" annual revenue headwind of more than $1 billion, or roughly 20% of the region's revenue.
• North America: A wave of U.S. store closures will continue to negatively impact results through the first half of fiscal 2028.

EPS Forecasts Slashed Below Consensus

As a result of these expected challenges, JPMorgan believes the Street is "mis-modeled" for future periods. The bank significantly lowered its earnings per share (EPS) estimates for Nike, framing fiscal 2028 as a "stabilization" year rather than one of growth.

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• The firm's fiscal 2027 EPS estimate was cut to $1.55, which is approximately 10% below the current consensus.
• Its fiscal 2028 EPS forecast was lowered to $1.72, about 20% below the Street's expectation.

Reflecting this more cautious outlook, JPMorgan set a new December 2027 price target of $40, down from $47. The target is based on a multiple of approximately 21 times the bank's calendar 2028 EPS estimate.

Maturing Market Context

JPMorgan also expressed broader concerns about the industry, noting that the global sports apparel and footwear market "is increasingly screening as a maturing category." The firm highlighted a reduced growth outlook for North America, now pegged at just 3%.

Investors will be looking for more clarity on the company's long-term strategy at Nike's upcoming investor day in November. According to JPMorgan, Nike is expected to outline a three-year plan at the event, with a target of achieving double-digit operating margins by fiscal 2030.