Barclays on Wednesday, March 11, upgraded its rating on Nike, Inc. to “Overweight” due to “recent operational progress, financial inflections, and management’s disciplined actions,” as well as the depressed valuation of Nike’s stock given progress in resetting the North America region.
The investment firm also raised its price target to $73 from $64.
On Monday, March 9, Nike’s shares closed at $56.08, down from $63.71 at the start of the year, after climbing as high as $90.62 soon after Nike announced in September 2024 the appointment of Elliot Hill as CEO to guide the turnaround.
Adrienne Yih, Barclays’ lead analyst in the U.S. specialty retail, apparel & footwear space, wrote that Nike’s recent progress in inventory management, operational resets and strategic focus on brand health and margin stabilization “provides a solid foundation for a more constructive investment thesis.”
She added, “While risks remain, particularly from tariffs, geopolitical risk, and demand uncertainty, the company’s actions and early financial inflections suggest that the worst may be behind it. For investors with a long-term horizon, NKE offers an attractive risk/reward profile as it moves closer to a fundamental bottom and positions itself for renewed growth.”
Yih also said the upgrade reflects what she views as “peak skepticism by investors” in the stock despite signs that the reset of North America, Nike’s largest region, is making progress as planned.
Yin also wrote in her note, “Current share price performance reflects a market narrative dominated by negative data points, particularly around China, while largely ignoring stabilizing trends in NA. We believe expectations now discount a worst-case outcome across regions simultaneously, which is inconsistent with underlying operating trends. Since NKE’s last earnings call (FY2Q26), investor sentiment has been driving home the same narrative talking points since before Elliott Hill took the helm – lost brand affinity, over-saturation of Classics franchises, lack of innovation, and inability to regain prior dominant competitive position. However, it should be noted that much work to repair the business has already transpired – resetting the marketplace, refilling the innovation pipeline, returning to the run segment with winning product, reinvestment in demand creation to rebuild the brand, and purging inventory to return to a full-price brand.”
Yih noted that the upgrade comes as she and other analysts expect Nike’s FY27 and FY28 target estimates will have to come down. Barclays’ FY27 and FY28 sales estimates are 4 percent and 5 percent below current consensus, while its FY27 and FY28 EPS estimates are 17 percent and 11 percent below current consensus, respectively.
However, Yih believes that with a likely consensus reset bringing estimates close to Barclays’ targets, “we believe downside risk is increasingly limited, while the setup for future beat-and-raise dynamics improves as expectations reset to more realistic levels.”
Yih concluded, “This upgrade is not a call on near-term acceleration or that investors will immediately be rewarded with ‘beat and raise’ quarters. We believe that will come, but we are a couple of quarters before that catalyst. In fact, we strongly believe that FY27 and FY28 consensus estimates, and in particular sales growth estimates, are too optimistic. In this part of a turnaround, we see “margins before sales” as NKE forgoes low-quality, margin-eroding sales in order to reinvigorate brand equity and brand heat. Ours is a call that the stock price already reflects a deeply pessimistic outcome, while operational reality is incrementally improving in the largest and most profitable region, NA. As expectations reset for staggered regional recoveries, we believe the balance of risk will shift in favor of investors willing to look beyond the need for one more material reset of FY27 and FY28 estimates.”
Image courtesy Nike (Nike Air Liquid Max)
