By Teresa Rivas

It's just over a month into the new year, but investors hoping that Nike could leave its problems in the past have already been disappointed. That may not change, but with sneakers still the official footwear of the post-Covid world, some of its rivals may fare better.

Nike has slumped more than 7% already in 2025, even as the S&P 500 has gained more than 3%. The drop puts the shares down by a third over the past year. New management may not be able to provide a quick fix: Citi's Paul Lejuez downgraded Nike to Neutral from Buy on Friday following an analyst event with CEO Elliott Hill, just over three months after he took the top job.

"After discussing the key building blocks and challenges to achieve a turnaround, we no longer believe fiscal 2026 will inflect the way we hoped, either on the sales or earnings before interest and taxes $(EBIT)$ margin line," he writes, while slashing his price target to $72 from $102. "Management acknowledged the competitive threat they face (especially in running), and said they have to earn shelf space back at partners (which made it sound like it wasn't coming easy). They reminded us that on the second-quarter call they said summer order books are down."

All of that suggests the need for patience that investors might not have as the stock languishes at less than half the value of its 2021 highs.

For his part Lejuez lowered his earnings estimates for fiscal 2026 warning that revenue "pressures seem likely to continue...without enough new product at scale to fill the void."

Despite Nike's yearslong underperformance, a slim majority of analysts are still bullish on the stock, with 21 of the 41 tracked by FactSet rating it at Buy or the equivalent (it just got an upgrade from Piper Sandler in mid-January). The average analyst price target of $84.53 implies more than 20% upside for the languishing shares.

Analysts are a notoriously optimistic bunch, of course, but it's understandable why they have been so slow to abandon Nike, given its historic position as a global powerhouse, with unparalleled brand recognition, deep pockets, and a long-term track record. Hence, the farther it falls the easier it is to think it's finally bottomed -- Barron's made that mistake in June 2024, but has since warned otherwise.

Moreover, of all the pandemic fashion shifts, comfortable shoes seem to have the longest legs: It feels counterintuitive to bet against Nike at a time when everything from dad sneakers to chunky platforms are considered high street style.

Yet, as Hoka owner Deckers Outdoor and On Holdings have shown there are other ways to play that trend, as Barron's has argued in the past.

In combination with his Nike downgrade, Lejuez boosted his rating on Deckers to Buy from Neutral, maintaining a $215 price target; he argues that a recent selloff was "unwarranted," particularly as the company's outlook "is not an indication of slowing Hoka demand."

Deckers' guidance for the brand implied low double-digit sales, driven by potentially weaker wholesale growth. However, he argues that "the dynamics of slower wholesale growth...are easily explained" given that the year-ago period included a large expansion of retail partners.

"This year, Hoka plans to open fewer wholesale doors, AND growth will be more spread out...Importantly, direct-to-consumer grew 28% in the third quarter, and we model mid-20% DTC growth in the fourth quarter/fiscal 2026 driven by demand for new products/international [sales]," he writes. "We still believe Hoka can achieve 20% growth in fiscal 2026 (the market fears it can't)."

That optimism doesn't look misplaced, given the popularity of Hokas in particular, and athleisure as a whole. Unfortunately for Nike, investors can't yet rule out that there's another shoe to drop.

Write to Teresa Rivas at teresa.rivas@barrons.com

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February 07, 2025 12:42 ET (17:42 GMT)

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