Shares of Nike (NKE -4.26%) are trading 57% below their previous peak due to weak financial performance in the past few years. Retail traffic was still a challenge for the leading athletic wear brand in the most recent quarter, but some analysts see a buying opportunity ahead of its turnaround.
BMO Capital analyst Simeon Siegel maintained an outperform (buy) rating on the stock. The analyst also raised the firm's price target from $92 to $95, implying 27% upside over the current $75 share price.
Still, it's questionable whether Nike will see enough improvement in the near term to send its shares higher. Here's what investors should expect from the stock.
Nike is implementing several changes to improve sales, including doubling down on innovation and adjusting its marketing strategy to better connect with customers.
It's a good bet the leading brand can bounce back, but the question is timing. It won't be a quick turnaround. Management believes its strategy will ultimately return the company to profitable growth, but as they said on the earnings call in Dec. 2024, "[T]hese actions are going to take time to carry all the way through." The latest guidance calls for fiscal 2025 third-quarter revenue to be down low double digits year over year.
Despite Nike's struggles, the stock is not cheap, trading at 36 times this year's earnings estimate. And investors shouldn't buy Nike stock expecting it to reach Siegel's price target in the near term. The analyst consensus has Nike's earnings reaching $3.10 in fiscal 2027. Assuming the stock is trading at 30 times earnings at that time, in line with the S&P 500's current price-to-earnings ratio, that would put the share price at $93.
Put simply, investors will need to be patient with Nike, even if they believe in its turnaround plan.
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