Emily Dattilo

Nike has a strong margin and earnings recovery opportunity, Jefferies argued on Monday.

Analysts led by Randal Konik upgraded shares of the apparel maker to Buy from Hold, increased their price target to $115 from $75, and named it a new top pick in a report titled "Changes Afoot & Cuts Priced In."

Nike stock gained 2.2% to $78.18 in premarket trading Monday. Over the last 12 months, shares have fallen 27%.

The Jefferies team anticipates a recovery in margin and earnings per share, forecasting fiscal 2027 earnings of $3.50, higher than Wall Street's call for $2.95.

Along that line, analysts offered a slate of reasons for the upgrade including that a restocking cycle is on the horizon. The company's focus on legacy lifestyle franchises including Air Jordan 1, Nike Dunk, and Air Force 1 has led to a pile up of inventory, which is now being cleared, they wrote. That process will allow for new innovations to debut and prompt a restocking cycle beginning in the fall.

"NKE is acutely aware of the need to revitalize product innovation," analysts wrote, adding that an analysis of job listings shows a boost in product-related roles.

As inventory levels improve and new products let full-price selling resume, gross margins could return closer to their 10-year average of about 45%, Jefferies continued. "Gross margins peaked at 47.1% in first-quarter 2022 for Nike, whereas they currently sit at 43% as of second-quarter 2025," the analysts added.

The analyst team remains quite optimistic about the company's strength in the athletic industry. Nike may have ceded a bit of market share to competitors, analysts acknowledged, but the losses are small "due to the global ubiquity of the Nike brand and its distribution advantage." Thanks to its leadership in footwear and apparel, the team doesn't see competitors disrupting that dominance.

Write to Emily Dattilo at emily.dattilo@dowjones.com

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February 24, 2025 08:42 ET (13:42 GMT)

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