Nike (NYSE:NKE) is at a crossroads, where leadership changes and mounting competition are testing the brand’s ability to stay ahead.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
The company’s fiscal first-quarter results (August quarter, released in early October) were a mixed bag with the bears taking hold of the narrative after the athletic apparel giant withdrew its FY25 guide and delayed its Investor Day to allow for a CEO transition.
Veteran executive Elliott Hill stepped in as CEO on October 14, succeeding John Donahoe. Hill’s mission is clear: reclaim lost market share after the company has been losing ground to smaller players such as Hoka, On, and New Balance.
With fiscal Q2 earnings on deck for next Thursday (December 19) — and guidance limited to just one quarter ahead — Baird analyst Jonathan Komp, who ranks in the top 4% of Wall Street stock experts, believes Nike has “set a bar that looks achievable.”
That includes a revenue drop between 8-10%. As in Q1, when revenue dropped by 10.4%, Nike continues to experience a decline in demand for Classic footwear styles, which has significantly impacted digital sales (down 20% in FQ1, with Classics plummeting almost 50%). The trend is expected to persist throughout F2025, further impacted by reduced retail traffic and ongoing difficulties in the Chinese market. As for the bottom line, Komp anticipates EPS to meet with or slightly exceed his $0.65 estimate, which is the same as consensus, although he notes the potential for “some flexibility” from SG&A.
Looking ahead to FQ3, based on recent cautious commentary from players like JD Sports and Foot Locke, Komp sees “risk to FQ3E gross margin and earnings commentary,” and is calling for FQ3E EPS of $0.60 vs. the Street at $0.67.
However, more than the near-term results, Komp thinks new CEO Elliott Hill’s vision and progress on innovation will matter the most.
“In his 33rd year at Nike, we expect CEO Elliott Hill to provide useful clarity on actions needed to strengthen the brand by doubling down on innovation in key performance categories (especially running which returned to growth, basketball), re-balancing the marketplace (emphasizing better retailer relationships including ‘several billion’ dollar opportunity at <$100 and repairing morale/culture, while actions to improve speed/organizational function may take longer to develop,” the 5-star analyst explained.
Can Hill do that? Komp thinks so, believing that alongside Tom Peddie, VP/GM of North America, they are the “right leaders to drive a marketplace recovery.” Additionally, a positive reaction to new product launches could bolster confidence in the brand’s fundamentals over the coming quarters.
To this end, Komp rates Nike shares an Outperform (i.e., Buy), backed by a $110 price target. Investors could be pocketing gains of 42%, should Komp’s thesis play out as expected. (To watch Komp’s track record, click here)
Not everyone on Wall Street is on board, though. Based on a mix of 15 Buys vs. 13 Holds, the stock claims a Moderate Buy consensus rating. At $90.81, the average price target factors in a 12-month gain of 17.5%. (See Nike stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
