Nike stock target cut at Needham on delayed recovery

Investing.com -- Needham analysts trimmed their price target on Nike (NYSE:NKE) stock to $66 from $75 amid ongoing weakness in brand momentum and a slower-than-expected path to recovery.

The brokerage maintained its Buy rating but lowered estimates for fiscal years 2026 and 2027, projecting earnings per share (EPS) of $1.52 and $2.15, respectively, down from previous estimates of $1.75 and $2.42.

The lowered price target reflects a valuation of approximately 30 times projected EPS for fiscal 2027 (FY27), consistent with the firm’s revised outlook.

“We’ve been waiting for the Nike turnaround, and it looks like we’ll be waiting longer,” Needham analyst Tom Nikic said in a Wednesday note, pointing to continued softness in demand for once-scarce models like Jordans and Dunks, which are now being discounted on resale platforms.

The analyst noted that just 5 of 11 Jordan and Dunk launches in May were trading at a premium, signaling waning appeal.

Needham’s report highlights deteriorating online search trends and ongoing double-digit declines in U.S. direct-to-consumer credit card transactions. These factors, combined with a heavier reliance on wholesale distribution, are expected to weigh on margins.

Nikic warned that consensus estimates for fiscal 2026 remain too high, particularly around gross margin expectations.

For the first quarter of FY26, the analyst anticipates ~500bps of gross margin erosion. For the full year, he projects a 200-250 basis point gross margin headwind tied to tariffs alone, estimating an additional $1 billion in annual costs of goods sold.

"This presents a ~$0.50 headwind to EPS," Nikic said, though some of the impact could be offset through pricing and supplier concessions.

Discounting and unfavorable channel mix are projected to persist into the first half of the fiscal year, further weighing on profitability.

For the upcoming fourth-quarter earnings on June 26, Needham forecasts modest upside to EPS due to Nike’s historically conservative guidance. Still, the broker believes risk-reward is skewed negatively into the print, given broader challenges.

“Nike still faces headwinds from rationalizing over-supplied product franchises (Jordan, Dunk), brand heat still appears to be lukewarm, and they now have tariffs to contend with as well,” Nikic emphasized.

Despite near-term concerns, the analyst continues to back the long-term potential of new CEO Elliott Hill’s strategy.