TLDR
- Nike stock declined over 2% during Friday’s premarket session following Bank of America’s downgrade from Neutral to Underperform.
- The firm reduced its price target from $47 to $30, suggesting approximately 17% downside from the previous closing price.
- BofA reduced fiscal 2027 and 2028 earnings projections by 11% and 12% respectively, forecasting negative revenue growth extending through fiscal 2027.
- The momentum in North American wholesale channels is expected to deteriorate as product sellout rates fall behind shipment volumes, particularly for legacy footwear lines.
- China revenue plunged 17% in the latest quarter, with additional headwinds anticipated as the company reduces its digital marketplace presence.
Nike stock experienced a premarket decline exceeding 2% on Friday following a downgrade from Bank of America, which shifted its rating from Neutral to Underperform.
BofA analyst Lorraine Hutchinson simultaneously reduced the firm’s price objective to $30 from the previous $47 level. This revised target represents approximately 17% downside potential from the company’s most recent closing price.
The investment bank now anticipates Nike’s revenue revival will be delayed until fiscal 2028. This represents a meaningful pushback from BofA’s earlier projections of a quicker recovery trajectory.
The firm revised its earnings per share forecast for fiscal 2027 downward by 11% and its fiscal 2028 projection lower by 12%. The updated fiscal 2027 estimate now stands 14% beneath the Visible Alpha consensus expectation.
Wholesale Momentum Showing Signs of Fatigue
The North American wholesale channel had emerged as a relative strength for Nike, posting 14% growth during fiscal 2026 even as overall revenue remained stagnant. However, BofA believes this positive trend is nearing exhaustion.
Retail sellout velocity is currently trailing shipment rates, indicating retailers are experiencing difficulty moving inventory at the pace Nike is delivering it. Traditional franchise footwear is experiencing declining consumer interest, while certain recent product introductions have failed to generate meaningful traction.
This dynamic may prompt wholesale partners to adopt a more conservative purchasing stance. BofA projects North American wholesale revenue will turn negative beginning in the second quarter and persist through the remainder of fiscal 2027.
Chinese Market Continues to Struggle
Revenue from Nike’s Greater China region contracted 17% during the most recent reporting period. Research from BofA’s Luxury Goods analysts, conducted through on-the-ground visits in China, revealed a nuanced situation.
Their findings pointed to subdued athletic demand and new product offerings that aren’t connecting with Chinese consumers. Performance running category momentum is slowing, while surplus inventory is accumulating amid softening consumer demand.
Additionally, Nike is strategically reducing its footprint with online marketplace partners in China. BofA anticipates this transition will generate heightened promotional activity through the second quarter before enabling Nike to establish more unified brand positioning across digital channels.
The shares have experienced significant pressure over the past year beyond today’s decline. Nike stock has dropped 44% year to date, contrasting sharply with the S&P 500’s 12% advance.
BofA noted this decline already incorporates a 40% reduction to fiscal 2027 earnings estimates during the same timeframe. The firm’s analysts believe the stock cannot sustain premium valuation multiples amid continued earnings estimate reductions.
One positive development involves tariff exposure. Current duty rates on Nike merchandise range from 10% to 12.5%, representing a decline from approximately 20% a year earlier.
BofA anticipates Nike’s recently appointed CFO will prioritize expense reduction initiatives. Operating expense optimization is viewed as a probable area of concentration.
Dividend sustainability represents an additional concern highlighted in the research note. BofA’s fiscal 2027 projections imply a payout ratio of 107%, indicating the dividend payment would surpass net income.
This factor contributed to BofA’s decision to downgrade its income rating on the shares. With revenue under pressure, the bank stated Nike’s profit trajectory will rely substantially on gross profit margin improvement and enhanced expense discipline.
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