Morgan Stanley resumed coverage of some major sportswear brands with a “cautious” outlook due to heightened competition and an increasingly promotional climate. Analyst Alex Straton issued an “Underweight” rating on both Nike and Under Armour, “Equal Weight” on Amer Sports, and “Overweight” on On Holdings.
Straton wrote in a note, “We resume Sportswear with a cautious group view, as structural fragmentation collides with a pressured N-T promotional backdrop & weak Consumer stock sentiment. Share continues shifting toward niche/premium, Chinese domestic, & broader fashion brands, while elevated promotions & weakness at industry leader NKE further pressure an already competitive marketplace. Layer on weak Consumer sponsorship amid a still-dominant AI/technology trade, & we see a triple headwind: fragmentation, NTM earnings pressure, & an unfavorable equity-market backdrop.”
In issuing an “Underweight” rating on Nike, the analyst said she believes the market is “underwriting recovery faster than the evidence supports.”
Straton assigned price target of $31 on Nike. On Friday, shares of Nike closed at $36.80, up 18 cents on the day.
She stated, “For NKE, we think consensus embeds too much growth too soon – particularly in China – while valuation still reflects more of the old NKE/sportswear landscape than today’s fragmented market. This creates downside from both negative estimate revisions & de-rating, with our $31 price target implying ~20% downside.”
Straton noted that in the near-term, consensus forecasts call for an acceleration of sales across every region in the second half of Nike’s current fiscal year ended May 31, 2027, despite broader sportswear demand remaining “pressured” and the recent appointment of a new CFO, Dave Denton, that “provides greater flexibility to reset expectations & extend the turnaround timeline, in our view.”
She also believes China represents an “underappreciated N-T [near-term] topline risk,” given Nike’s move to end online distribution deals for major Chinese partners Topsports and Pou Sheng in mainland China at the start of the calendar 2207 year.
In the medium-term, Straton expects low-single digit sales growth for Nike over the FY28 to FY 30 due to continued pressures from the China reset and the fallout from an increasingly-fragmented sportswear space. Straton said, “We think share shift toward niche/premium, Chinese domestic, & general fashion players makes legacy mass sportswear brands’ return to historical growth/profitability algorithms increasingly difficult to underwrite.”
Morgan Stanley’s latest U.S. sportswear survey (conducted in June 2026) pointed to some improvement in Nike’s brand perception, with consumers more likely than in 2024 to associate the brand with performance, premium positioning, and gaining popularity, with all of these metrics improving versus peers. However, Nike’s NPS (net promoter score) score also fell, suggesting brand perception gains have yet to translate into stronger demand. Stratton added, “We also saw a meaningful increase in promotional attribution, underscoring our concern that promotions may remain a more structural part of the model & limit the extent of GM recovery.”
On Under Armour, Stratton said the “Underweight” rating reflects Morgan Stanley’s view that the market is “prematurely underwriting” a return to revenue growth. Consensus estimates call for Under Armour’s sales to inflect from negative 5 percent year-over-year in FY27 to positive 2 percent in FY28.
She stated, “Our survey work, market share analysis, scale framework, & high-frequency demand indicators suggest still-limited turnaround traction, while an increasingly fragmented & promotional sportswear backdrop makes share recapture even more difficult.”
Morgan Stanley’s recent U.S. sportswear survey showed Under Armour’s brand perception with more consumers viewing the brand as “premium, performance-oriented, & high quality,” but awareness and NPS were both unchanged and Under Armour showed the second-largest decline in LTM [last-twelve month purchases] among brands surveyed, after Nike. Promotional attribution was also still high.
Stratton wrote in the note, “We applaud UAA for its progress simplifying the business, sharpening the assortment, & improving marketplace discipline. But across our survey, market share, scale, & high-frequency demand work, we see limited evidence that these improvements are translating into stronger consumer demand relative to the topline recovery embedded in consensus forecasts.”
Morgan Stanley assigned a price target of $4 on Under Armour. Shares closed Friday at $5.11, ahead 14 cents.
Stratton’s “Overweight” rating on On Holding reflects her view that the stock’s 40 percent year-to-date decline “overstates the deterioration in M-T [mid-term] fundamentals, creating a two-pronged opportunity from both positive estimate revisions & valuation re-rating.”
She believes analysts’ consensus reflects an “outsized” mid-term deceleration, particularly in the Americas and EMEA regions. Morgan Stanley’s latest U.S. sportswear survey pointed to improving brand heat, continued performance/premium differentiation, greater credit for assortment expansion, and strong younger-consumer capture for the On brand, while still-low awareness/purchasing behavior suggests “meaningful remaining runway.”
Stratton also said consensus estimates also underestimate “margin maturation” from greater DTC mix and improved cost discipline under new management. In early May, co-founders David Allemann and Caspar Coppetti took over as co-CEOs.
Finally, she said On’s stock valuation “appears inconsistent with its superior growth & profitability profile vs. sportswear/global brand peers.” She set a price target of $39 on the stock. On Friday, shares of On closed at $27.41, up 56 cents.
Stratton’s “Equal-Weight” rating on Amer reflects the view that Amer’s strong growth and profitability profile is already reflected in both consensus expectations and valuation. The analyst wrote, “Street forecasts already sit above the high end of implied Investor Day targets across all three segments, while our scale analysis broadly supports – but does not materially exceed – the revenue trajectory embedded in current estimates. At ~9x ’27e EV/EBITDA, we view AS’s premium valuation as appropriate for its stronger fundamental profile, together leaving limited room for either positive estimate revisions or multiple expansion. Taken together, we see a relatively balanced risk/reward from current levels.”
Morgan Stanley’s latest U.S. sportswear survey found “mixed” results for Amer’s biggest brands. Arc’teryx maintained its performance orientation while expanding retail distribution and assortment breadth that Stratton saw as an “encouraging sign,” but weaker relative readings were seen on popularity, quality and innovation “raise some questions around the longevity of its brand heat.”
Salomon saw strength across a broad range of attributes, including gains in popularity, fit/quality, assortment and innovation. Stratton added, “However, narrowing relative performance/premium differentiation suggests some of this strength may be increasingly lifestyle-driven, which could prove more difficult to sustain.” Awareness improved “only modestly” for Arc’teryx and Salomon.
Wilson delivered weaker scores across several brand attributes, although Stratton believe that “largely reflects its positioning as an equipment-led brand vs. the broader sportswear set.”
Morgan Stanley set a price target on Amer of $31. Amer’s stock closed Friday at $28.07, up 66 cents.
Image courtesy Nike
