Shares of Nike climbed $2.97, or 3.9 percent, to $79.24 on Monday after JPMorgan upgraded the stock to “overweight” from “neutral” due to progress in reducing inventories, momentum in securing wholesale orders and innovation showing promise for performance products.

The firm also raised its price target for the stock to $93 from $64 by December 2026.

In his note, JPMorgan analyst Matt Boss stated that following recent fieldwork, management access, and 10-K review, he raised his FY26 and FY27 EPS estimates for Nike for the first time in 13 months, or since he downgraded the stock to “neutral” in June 2024. He added, “Importantly, our upgrade to overweight is predicated on a 5-pronged multi-year recovery path equating to a +high-teens to 20 percent EPS growth algorithm through FY30 (5 years+).”

The five pillars expected to support Nike’s recovery are:

  • Inventory alignment to sales growth is expected by the end of Nike’s Q226 quarter.
  • Accelerating momentum within global wholesale order books.
  • The scaling of some successes within the Performance product throughout FY26.
  • The anniversary in the second half of Nike’s current fiscal year is $500 million in reserves to clear excess inventory.
  • 500 basis points of operating margin recovery expected between FY26 and FY28 to restore Nike to a 10.0 percent operating margin rate.

Regarding inventory, Boss said that Nike’s management reaffirmed the timeline and expectation to return to a healthy and clean marketplace by the end of 1H26, with continued liquidation actions being taken through factory stores and select value partners in the first half of the current fiscal year. Boss wrote, “Defining the ‘clean marketplace’ by 2Q26-end, management sees inventory growth relative to sales growth as a valid KPI to judge the health of global inventories, with mgmt internally also evaluating weeks on hand of supply & partner inventory levels of NKE product.”

Regarding bookings, Boss noted that Nike officials on its June 26 fiscal fourth-quarter analyst call indicated that Holiday 2026 order books are up year-over-year, with growth in North America, EMEA, and APLA, partially offset by Greater China. This represents sequential improvement relative to Fall 2025 order books, which were “nearly flat,” and Spring ’25 order books, which were “roughly flat.”

Boss said Nike officials indicated that newness across Performance and Sportswear helped offset declines in Classics franchises, supporting the healthier order book, marking the first time Performance was seen offsetting Classics declines since Eric Hill took over as CEO in October 2024. Boss also noted that management clarified that the improved order book was largely due to strong sell-throughs at existing partners on recent running launches, led by Vomero 18, which resulted in requests for replenishment and additional allocations rather than expanded distribution and the addition of new partners, such as Amazon, Urban Outfitters and Aritzia.

Boss added that his team’s checks found initial wholesale partner feedback to Spring/Summer 2026 product to be “very favorable” and could represent the next catalyst to drive Nike’s top-line growth.

Around innovation, Boss said Hill’s focus on having Nike “lead with sport” is showing signs of paying off. The running category saw high-single-digit growth in the fiscal fourth quarter, led by Pegasus Premium, Vomero 18, Structure, and Swift & Stride apparel. Training experienced sell-through and momentum across Metcon and the 24.7 apparel collection in FY25, “with more to come into next calendar year by our work,” said Boss.

Nike also has a healthy pipeline of Performance basketball product tied to its NBA and WNBA ambassadors and a strong lineup set for the Summer World Cup 2026.

Added Boss in the note, “Importantly, the amplified pipeline of newness & innovation across multiple categories within Performance should not only support a ‘build’ of orderbook momentum across wholesale partners into Spring/Summer 2026 in our view, but also can (1) create a favorable halo to classic silhouettes as seen in historical precedent (w/ historically a high probability of success for classics launched from the Vault alongside new Performance product = “rebalancing” approach to franchise management), and (2) support ASP growth YOY on full-price selling of newness in addition to high-priced innovative/technical product.

Other factors supporting Nike’s recovery efforts include the brand’s moves in the second half of fiscal 2025 to allocate $500 million in reserves to take back product from wholesale partners, which JPMorgan estimates should result in a year-over-year tailwind of at least 350 basis points in the second half of fiscal 2026.

JPMorgan’s model also forecasts a 470 basis points of operating margin expansion over FY27/28 from an estimated 5.3 percent operating margin for the current fiscal year to reach 10.0 percent operating margins by FY28, representing EPS growth of 17 percent to 18 percent on average from FY26 to FY28. Gross margins are particularly expected to benefit as average selling prices improve following the inventory liquidation actions.

JPMorgan raised its FY26 EPS on Nike to $1.32, up from its prior estimate of $1.07 relative and Wall Street’s current estimate of $1.62 based on a 2.0 percent revenue decline versus Wall Street’s consensus expectation of a revenue decline of 0.9 percent. Boss raised his FY27 EPS on Nike to $2.08 versus $1.98 prior and Wall Street’s consensus of $2.45.

Image courtesy Nike