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Investing.com -- Nike shares are trading around 1.6% higher premarket on Wednesday after TD Cowen upgraded the stock to Buy, highlighting the company’s “iconic global brand in sport at trough margins with $4+ in EPS/$6B in FCF potential” and underappreciated margin recovery, citing improvements under the new management team and improving data trends.
The analysts point to three reasons to “underwrite the turnaround”: brand strength, execution by management, and margin recovery that is “underappreciated in consensus estimates on a multi-year basis.”
Field research by TD Cowen is said to indicate gradually improving trends for Nike and Jordan footwear and apparel, particularly Tech Fleece, while growth at competitors such as New Balance, Adidas, Saucony, Skechers, and Asics is slowing.
The analysts write that declining share gains and digital traffic at these peers “leave more room for dollar growth at Nike globally.”
TD Cowen projects a return to sales growth in FY24 ex-FX, with growth inflecting to mid-single digits in FY27, and EBIT margin recovering to 9.3%, noting their EPS estimate of $2.59 is above consensus of $2.44.
They highlight that improved marketplace and inventory management are key catalysts for earnings revisions, with FY26E gross margin of 41.5% versus historical potential in the mid-to-high 40s.
Nike’s consumer preference also shows strength, with running preference reaching a new TTM share peak of 36.9% in May and July 2025 and lifestyle preference at 27.7%, near the TTM peak of 28.7% in January 2025.
TD Cowen notes that trend lines suggest stability or slight sequential improvement in Running and Casual categories, and a stabilizing position in Basketball.
Reflecting these improvements, TD Cowen raises its price target to $85 from $62, representing 33x FY27E EPS and 23x EV/EBITDA, citing both cyclical recovery and long-term growth potential.