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Nike (NKE), the world leader in athletic footwear and apparel, is set to report third-quarter fiscal 2025 earnings on Thursday. While the company has struggled in recent quarters due to supply chain disruptions and inflationary pressures, management’s focus on operational efficiencies and new strategic initiatives may help it recover as its brand strength still remains intact. Furthermore, the management of sportswear and footwear retailer Foot Locker (FL) has expressed confidence in its partnership with Nike, citing its positive impact on the company’s performance in the fourth quarter of 2024.
Nike stock is down 2.9% year-to-date. However, Jefferies analysts recommend buying the stock “aggressively” because they believe it is poised for a comeback. Jefferies upgraded the stock to “Buy” and raised the price target to $115. This new target price exceeds Wall Street's average target price of near $85 and represents upside potential of more than 50%.
Let’s find out more.
Nike: A Rocky Road to a Stronger Future
The company has faced challenges in the first two quarters of its fiscal 2025. Net revenue fell 10% in the first quarter and 8% in the second quarter, totaling $12.4 billion. Nike’s management believes that its recent focus on digital sales has affected the overall stability of the marketplace. Elliott Hill, Nike’s new CEO, plans to restore balance by strengthening both Nike Direct and wholesale partnerships.
In the Q2 earnings call, Hill outlined a bold plan to reposition Nike for long-term success, with a focus on innovation, brand storytelling, and expanded partnerships. Nike will also move away from heavy discounting and adopt a premium pricing strategy to reinforce its market position. Jefferies commended Nike’s strategies under Hill, including partnerships with wholesalers, reducing reliance on digital sales, and innovative product launches. Despite minor market share losses to competitors, Nike continues to be the global leader in sportswear.
During Footlocker’s Q4 earnings call, CEO Mary Dillon stated that their partnership with Nike is “strong and fully reset,” emphasizing their shared commitment to serving “multicultural” customers. She stated that Foot Locker’s strategies, when combined with Nike’s strong product pipeline and storytelling focus, position both companies for long-term success. According to an Oppenheimer analyst, this is a positive sign for Nike’s turnaround story, as Nike shoes and apparel account for more than 60% of Foot Locker’s revenue.
Besides being a growth stock, Nike is also an income stock, known for its shareholder-friendly policies like share buybacks and dividends. Nike pays a forward dividend yield of 2.2%, higher than the consumer discretionary average of 1.89%. Plus, Nike, which has increased its dividends for the past 23 years, may soon join the Dividend Aristocrats group. In the second quarter, Nike paid out $557 million in dividends and repurchased shares worth $1.1 billion. The company has a four-year share repurchase program worth $18 billion, showcasing its commitment to shareholders.
Is Nike Stock a Buy, Hold, or Sell Now?
Most analysts are noting Nike’s strategic efforts to reshape its business. For instance, Evercore ISI analyst Michael Binetti has maintained his “Buy” rating on Nike, citing several key factors that point to a positive outlook for the company’s future performance. According to Binetti, Nike’s strategic innovations and significant marketing investments are driving an improvement in retailer sentiment. Recent product launches, particularly those from the Jordan brand, have seen strong sell-through rates, indicating renewed consumer demand. The analyst believes Nike will meet the assigned target price of $97. However, TD Cowen analyst John Kernan believes that, while Nike’s recovery is showing positive signs, the company will face challenges in the near term. Kernan has a “Hold” rating on the stock.
Analysts predict that third-quarter revenue could dip to $11.02 billion, with earnings per share landing at $0.29. This compares to revenue of $12.4 billion and diluted EPS of $0.77 in the prior-year quarter. For the full-year fiscal 2025, analysts forecast a 10.4% decline in revenue to $46.04 billion, followed by a 47.3% dip in earnings per share. However, revenue and earnings are expected to bounce back and increase by 1.04% and 11%, respectively, in fiscal 2026.
On Wall Street, Nike stock has earned a “Moderate Buy” rating. Of the 33 analysts who cover the stock, 17 rate it as a “Strong Buy,” one as a “Moderate Buy,” 13 as a “Hold,” and two as a “Strong Sell.” The average analyst target price of $85.33 for Nike implies a 17% increase over current levels. Furthermore, its Street-high estimate of $120 suggests that the stock could rally by up to 63% over the next year.
Nike’s stock appears overvalued, trading at 31 times forward 2026 earnings. According to a Jefferies analyst, Nike is “nearing a valuation trough” and that now may be the time to “aggressively” buy its shares. I believe that investors with a long-term horizon and a high risk tolerance who see Nike on the mend may find this growth and income stock an attractive buy right now.
