Wells Fargo upgraded its rating on Nike to “Overweight” from “Equal weight” and its price target to $75 from $60. Wells Fargo analyst Ike Boruchow cited reduced headwinds from Classics footwear franchises (Air Force 1, Air Jordan and Dunk) and an uptick in growth in non-Classic footwear styles as part of the reason for the upgrade.

The analyst overall cited the benefit of improving visibility into the company’s sales and margins going forward. In a note, Boruchow said Nike has been in a “negative revision cycle” for more than three years, and he expects this trend to reverse over the next 6-9 months.

Boruchow added that, for the first time in years, he is seeing several positive changes at Nike, including better visibility into its new strategies, clear signs of product innovation, and easing pressure in the Classics business. He wrote in a note, “We can finally begin to map out realistic ‘return to growth’ forecasts, while sizable margin levers likewise take hold.”

He said Nike “has the potential” to deliver growth in the range of 3 percent to 4 percent in its fiscal year ending May 2026, with gross margins expanding by more than 200 basis points.

Boruchow contends that pressure from excess inventories of Nike’s Classics line in the marketplace has likely peaked, given Wells Fargo industry checks and Nike management’s comments indicating stabilization in its Air Force 1 and Air Jordan stocks. He also cited historical sneaker search data, showing that large franchise downtrends, with examples including recovery times for Vans Old Skool and Adidas’ Stan Smith, can last 40 to 70 months. In contrast, Air Force 1 has a recovery time of 63 months, and Air Jordan has a recovery time of 54 months.

He said Classics’ revenues were down more than 30 percent in Nike’s fiscal fourth quarter and likely down 30 percent in the fiscal first quarter. He estimates Classic revenues will decline this year to $9 billion from about $11.5 billion in FY25.

At the same time, Boruchow estimates that non-Classics footwear models contributed to more than 20 percent growth in the fiscal first quarter, and Nike’s other categories likely improved mid-single digits, paced by apparel. He wrote, ‘While wholesale sell-in surely accounts for a chunk of this growth, it’s also clear that NKE’s revamped silhouettes (Vomero and Peg) are driving greater volumes and should lend credibility to the turnaround efforts.”

Finally, Boruchow noted that while gross margins continued to decline in the fiscal first quarter, several key drivers “should lead to material GM recapture,” starting in the second half of FY26, including the lapping of liquidation of North American inventories, its commitment to full-price selling and improving average selling prices within Nike Direct channels, and the potential recapture of inventory reserves. For FY27, China’s potential margin recovery could be another tailwind.

For the current fiscal year, China remains a margin headwind, as well as tariffs and Converse, but he sees the tailwinds offering potential for Nike to deliver upside to Wall Street’s consensus gross margin target for the remainder of the fiscal year in the 50- to 100-basis-point range.

Boruchow raised his EPS estimate on Nike to $1.70 from $1.60 for FY26, and to $2.40 from $2.25 for FY27. In fact, with stronger revenue drivers (stabilizing the Classics business and growth in non-Classics) and margin recovery (improved pricing and lower liquidation costs), he sees a possible “Bull case” estimate of the company delivering EPS of about $2.00 in Fiscal 2026 and $3.00 in Fiscal 2027.

Nike earned $2.16 a share in FY25. Analysts’ consensus targets on Nike are at $1.68 for the current fiscal year and $2.53 for FY27.

Shares of Nike closed Thursday, November 13, at $66.03, up $1.83, or 2.9 percent. The stock began the year at $75.67.

Image courtesy Nike