Nike Stock Downgraded by BofA on Extended Sales Slump Concerns

Nike (NKE) shares declined more than 2% in premarket trading Friday after Bank of America downgraded the athletic apparel giant to Underperform from Neutral. Analysts cited a significantly delayed sales turnaround, which the bank now believes will not materialize until fiscal 2028.

BofA Slashes Estimates and Price Target

Analysts led by Lorraine Hutchinson lowered their price objective on Nike stock to $30 from $47, projecting negative sales growth for the company through fiscal 2027. The firm's revised outlook represents a stark reversal from a previous expectation of a sales inflection in the spring.

Key revisions from the BofA report include:

• EPS Estimates: Fiscal 2027 and 2028 earnings-per-share estimates were cut by 11% and 12%, respectively. The bank's 2027 EPS forecast is now 14% below the Visible Alpha consensus.
• Valuation Multiple: The new price objective is based on a 16 times price-to-earnings (P/E) multiple, a reduction from 22 times, bringing it in line with the peer average.
• Dividend Concern: BofA also lowered its income rating for the stock, noting a dividend payout ratio that exceeds 100%.

Weakness in Key North American and China Markets

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The downgrade is underpinned by weakening trends in Nike's largest markets. In North America, analysts warn that product sell-through at retailers is lagging the rate of sell-in from Nike. They noted that new product launches are failing to meet expectations, which could make retail partners more cautious about future inventory commitments.

In China, a recent field trip by BofA's Luxury Goods team revealed weak consumer demand for sportswear, excess inventory, and new products that are not resonating with customers. The report also stated that Nike's move to reduce its online partner distribution is expected to create promotional pressure in the near term.

Outlook Hinges on Margin and Cost Control

BofA acknowledged that Nike's stock, which has fallen 44% year-to-date against a 12% gain for the S&P 500, already reflects significant cuts to earnings estimates. However, analysts believe it is "unlikely that the stock will hold a premium multiple in the face of further EPS cuts."

With sales under pressure, Nike's earnings outlook now depends heavily on its ability to expand gross margins and control costs. The bank sees some potential for margin improvement from lower tariffs. It also expects Nike's new CFO to make cost-cutting, including reductions in operating overhead, a key focus area.