Why analysts are rushing to downgrade Nike stock

Several Wall Street analysts downgraded Nike (NYSE:NKE) shares after the apparel giant slashed its full-year guidance and forecasted a sales decline amid sluggish sales in China and inconsistent global consumer trends.

Nike said it expects a 10% drop in sales for the current quarter, notably worse than the 3.2% decline analysts had predicted.

The report, coupled with analyst downgrades, sent the company’s shares tumbling more than 15% in premarket trading Friday.

Nike now projects fiscal 2025 sales to decline by mid-single digits, contrary to analyst expectations of a 0.9% increase. Previously, the company had anticipated sales growth. Moreover, the sportswear company expects first-half sales to decrease in the high single digits, compared to its earlier guidance of low single-digit declines.

In the fiscal fourth quarter, Nike exceeded earnings estimates due to successful cost-cutting measures but fell short on revenue.

Analysts cut their NKE ratings

In the wake of its disappointing print, UBS analysts downgraded Nike stock to Neutral from Buy and reduced the price target from $125 to $78.

“Nike's 4Q report indicated its fundamental trends are much worse than we realized,” said UBS analysts. “Our key conclusion is there will be no quick rebound for Nike's earnings. We believe Nike is embarking on what will be a multiyear reset of its business in order to return to healthy top-line growth rates.”

Similarly, investment bank Stifel lowered their NKE rating to Hold and trimmed the target price to $88 from $117.

Stifel analysts said Nike’s guidance for the fiscal 2025 “pushes prospects for growth inflection further into 2025, asking investors to both underwrite success of not yet proven styles and look across an uncertain consumer discretionary backdrop into 2HCY24 until momentum could build again into 2HCY25.”

Wall Street giant JPMorgan also downgraded the stock to Neutral from Overweight, highlighting that Nike missed consensus estimates for gross profit dollars by $180 million “despite favorable revenue shifts in both N/A and the Greater China region.”

Lastly, Morgan Stanley analysts moved their NKE rating to Equal Weight from Overweight while slashing the price target to $79 from $114 “on the back of another disappointing print and reduced outlook.”

“Our prior Overweight rating was predicated on a fiscal 2H revenue growth&P&L inflection. Tonight’s result&guidance put that out of view,” they added.