Nike’s turnaround is progressing, but likely not faster than investors expect: UBS

Investing.com -- UBS analysts say Nike’s turnaround is underway, but it will likely take at least a year before the changes translate into sustainable revenue growth. 

The analysts maintained a Neutral rating on the stock with a 12-month price target of $63 per share in a note on Wednesday.

“Nike’s turnaround is progressing, but probably not faster than investors expect,” UBS said, noting that the market is watching for a return to “+MSD% top-line growth at a healthy EBIT margin.” 

The commentary is based on a series of expert calls focusing on organizational, product, and marketing changes under CEO Elliott Hill.

UBS highlighted improvements in franchise management as a key positive development. 

Experts noted that in prior years, Nike’s product teams had over-leveraged classic franchises like the Air Force 1, Dunks, and Air Jordan 1, which came at the expense of innovation. 

“This led to the over-distribution of core classics franchises, which the company is now fixing,” UBS said. 

The expert view is that Hill’s clarification of Nike’s strategic direction should enhance operations and corporate culture.

Despite these steps, UBS expects it will take time for the changes to fully take effect. “It likely takes Nike at least another year or more for it to fully implement and execute Elliott Hill’s changes given the size and scale of Nike’s global operations,” the note said. 

Analysts cited three main factors: new teams need time to settle into roles, complex global operations require careful coordination across geographies and product categories, and product lead times of over a year delay impact on consumers.

UBS concluded that while Nike is making meaningful progress, the pace of recovery may not outstrip investor expectations. The firm’s $63 price target is based on 29 times its FY28 EPS estimate of $2.15.