Nike's stock is poised for a recovery as indications surface that the sportswear giant is making headway with its turnaround efforts led by a new chief executive, according to Truist Securities in a recent client note. The athletic footwear and apparel manufacturer's shares have retracted nearly 5% since announcing the return of Elliott Hill, a former long-standing executive, to the CEO position in September.
In light of this leadership change, Nike also withdrew its full-year guidance in October and chose to postpone its investor day. The note from Truist emphasized that the timing of this guidance pull aligns with the CEO transition phase, which suggests that Mr. Hill has yet to engage with investors regarding his plans and strategy going forward. Nevertheless, the brokerage anticipates that Hill's future comments will act as a constructive catalyst and a "significant" influencer on the stock price in the imminent future.
Investor sentiment tends to be cautiously optimistic regarding the company’s long-term turnaround potential, even as there is a prevailing negativity about near-term outcomes, per Truist's analysis. "In our view, sentiment has gotten low enough that modestly more positive commentary or indications that the new team can start to turn things around in fiscal 2026 should be enough for shares to outperform," the report stated. To better tackle its current challenges, a revised wholesale strategy is expected to aid Nike, especially since retailers are eager to collaborate with the company's new leadership after facing assortment issues in recent years.
Truist noted that Nike has ramped up promotional efforts surrounding this holiday season, which is likely to assist in diminishing inventory levels. The brokerage believes that the stock could witness a significant turn before any tangible improvements in fundamentals, thanks to Nike's prominent scale and established brand equity.
As it stands, Truist forecasts Nike's per-share earnings for fiscal 2025 to be between $2.50 and $2.80, adjusting its earlier estimates of $2.75 and $3.10 due to aggressive promotions linked with the company's turnaround plans. However, Truist remains vigilant regarding Nike's market performance in China, where macroeconomic challenges and competitive pressures persist.
The company pointed out diminishing foot traffic, consistently high promotional activity, and large inventories in the region during its fiscal first-quarter earnings call. Price: 78.02, Change: +0.81, Percent Change: +1.06.