Telsey reiterates Nike stock rating as brand works through transformation

Investing.com - Telsey Advisory Group maintained its Market Perform rating and $70.00 price target on Nike (NYSE:NKE) stock Friday as the athletic apparel giant continues its strategic transformation. According to InvestingPro data, Nike currently trades at a P/E ratio of 20.7x, with 8 analysts recently revising their earnings estimates upward for the upcoming period.

The research firm noted that Nike is taking appropriate steps to address its challenges by reducing excess inventory and rebalancing its product portfolio with increased focus on new offerings while decreasing emphasis on classic franchises. The company maintains strong financial health with a current ratio of 2.19, indicating sufficient liquidity to meet short-term obligations.

Telsey highlighted Nike’s efforts to strengthen relationships with wholesale partners as another positive step in the company’s ongoing transformation process, though it cautioned that the brand remains "a few quarters away from reaching stabilization."

The firm identified several structural profit headwinds facing Nike during this transition period, including the shift toward performance products versus classic franchises, increased wholesale sales compared to direct-to-consumer channels, and rising discounts to wholesale partners.

Telsey maintained its $70 price target based on applying a price-to-earnings multiple of approximately 28 times its fiscal year 2027 earnings per share estimate of $2.50, citing limited visibility into Nike’s financial algorithm over the next few years.

In other recent news, Nike reported its fourth-quarter 2025 earnings, surpassing market expectations with an earnings per share (EPS) of $0.14, compared to the forecast of $0.12, and revenue of $11.1 billion, exceeding the anticipated $10.7 billion. Despite a 12% year-over-year decline in revenue, strategic initiatives and product innovations have shown promise. Nike’s gross margins faced pressure, declining by 440 basis points, but new partnerships and distribution strategies are expected to drive future growth. HSBC upgraded Nike’s stock rating from Hold to Buy, raising its price target to $80.00 from $60.00, citing tangible evidence of a sales recovery path despite potential tariff impacts. Meanwhile, Citi raised its price target for Nike to $68 from $57, maintaining a Neutral rating, acknowledging improved fourth-quarter sales results and better-than-expected first-quarter sales guidance. Nike’s management noted that holiday orderbooks are up, with wholesale customers responding positively to new products and innovation efforts. However, direct-to-consumer sales are expected to remain weak during the holiday season and throughout fiscal 2026. The company aims to mitigate a $1 billion tariff impact and return to sustainable organic growth with double-digit operating margins.

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