Nike Sales Warning Prompts Morgan Stanley, JPMorgan, Others to Halt Buy Calls on Stocks

(Bloomberg) — Wall Street has become less bullish on Nike Inc. shares since 2017 after the sportswear company’s warning of a slower year ahead prompted a group of analysts to remove their buy calls on the stock.

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The sneaker maker has been losing ground to rivals such as Adidas AG, and its disappointing forecasts have prompted at least seven brokers, including JPMorgan Chase & Co., Morgan Stanley and UBS Group AG, to abandon their bullish positions and move to the sideline. Nike’s consensus rating — a proxy for the ratio of buy, hold and sell recommendations — fell to 3.8 out of five on Friday, its lowest level in more than six years.

Nike’s fundamental trends are “much worse than we realized,” UBS analyst Jay Sole wrote in a note Friday when he downgraded the stock to neutral from buy. “Its business model needs a major reset.”

Nike Inc. was once a favorite of Wall Street analysts, but in recent months the world’s largest sportswear company has lost fans as rivals like On Holding AG, Deckers Outdoor Corp. Hoka and Adidas have grabbed market share by appealing to consumers with new and innovative styles. Last week, Sam Poser of Williams Trading issued an early warning, telling investors to “sell the stock,” with a turnaround likely before 2026, if it happens at all.

Wall Street increased the cuts on Friday, with Morgan Stanley’s Alex Stratton downgrading Nike to the same weight. The combination of disappointing earnings and lower expectations has pushed its previously overweight thesis – based on revenue growth and improved P&L in the second half of fiscal 2025 – “out of the blue.”

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Shares fell 21%, trading as low as $74.76 in New York on Friday, the stock’s biggest intraday drop in more than 23 years. Nike now has 21 buy-equivalent recommendations, 20 holds and three sells among analysts tracked by Bloomberg. The average price target is $95.

In a downgrade note issued by Stifel’s Jim Duffy, downgrading Nike stock from buy to hold, while pushing the prospects for a growth turnaround even further, he asks investors to “confirm the success of patterns that have not yet been proven to work and consider the uncertain backdrop of the outlook.” “Consumers.”

Still, many are sticking to their buy calls. Lauren Hutchinson, an analyst at Bank of America Corp. who upgraded the stock to a buy in April, said the guidance reset was larger than expected, but she sees the new estimates as achievable and “could prove conservative if the pace of innovation accelerates quickly to offset lifestyle challenges.”

Right now, a combination of increasingly difficult macroeconomic conditions, an unfavorable channel mix, and volatility in China is weighing on the minds of many analysts, including Raymond James’ Rick Patel. He downgraded his market performance rating from outperform, writing that he had no confidence in revenue upside.

According to analyst Adrian Yeh of Barclays, the update “raised more questions and more uncertainty about the long-term health of the Nike brand.” Yeh downgraded the stock from “overweight” to “equal weight” and expects to remain on the sidelines until it sees greater evidence that the company’s strategic initiatives are driving renewed sales growth.

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– With the assistance of Katrina Kombolli and Michael Messika.

(Updates stock movement and adds details on Barclays downgrade.)

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