Nike Stock Soars After Earnings. Is It Time to Just Buy It?

Nike stock is up about 19% this month. (Lauren DeCicca/Getty Images)

Nike stock is on track to close out its best month in over two decades, charging higher on hopes that new CEO Elliott Hill’s turnaround plan will make the sportswear giant a winner again.

For investors, the question is simple: Is it to time to just do it and buy the stock?

Many analysts say yes. Optimism over Nike’s recovery prompted HSBC analyst Erwan Rambourg to upgrade the stock Friday following Nike’s earnings report Thursday afternoon. He also increased his price target to $80 from $60. This is Rambourg’s first Buy rating on Nike in 3½ years.

“We expect a ‘swoosh’-shaped recovery after years of pain,” he wrote in. a research note Friday. “Nike appears to us to be a battered leader with a convincing reboot and the interest of having a fully refreshed team that is acting with speed and experience.”

Under Hill, Nike is taking drastic steps to improve the business. The company is heavily discounting products to clean out inventories and start fresh with new styles. It is also investing in sports-focused innovation and marketing, and fixing relationships with wholesale partners that were severed under prior CEO John Donahoe.

Hill is also shaking up the company’s management team. Since October, Nike has promoted or hired just under a dozen high-ranking employees across the company, in what TD Cowen analyst John Kernan called the sector’s “most comprehensive” senior management changes in decades.

The new initiatives weighed on fiscal-fourth-quarter results. Earnings per share contracted by more than 80% year over year to 14 cents, and sales fell 12% to $11.1 billion in the period. Executives assured investors that the May quarter would reflect the biggest financial impact from the turnaround efforts.

Shares surged 16% Friday, on track for its largest one-day percent increase since its June 2021 earnings report, according to Dow Jones Market data. The stock is up about 19% this month, on track for its best month since December 2000, when it rose 31%. Year to date, shares are down 4%, underperforming the S&P 500’s 0.7% gain.

Barron’s recommended the stock a year ago. We were early then. And it might still be early—Thursday’s results suggest Nike still has a way to go before returning to growth. But progress is under way, and moving at a faster pace than many analysts expected, if management commentary on Thursday is anything to go by.

Inventory levels are getting better, demand for performance products is improving, and the tariff impact won’t be as bad as investors feared. (Nike predicts levies will crimp margins by only three-quarters of a percentage point throughout the fiscal year).

Critically, Nike’s guidance for first-quarter sales to decline by mid-single digits in percent terms was above Wall Street’s consensus for a 7% decline—the first time the company’s outlook comes ahead of expectations since the fourth quarter of 2023, notes Simeon Siegel, an analyst at BMO Capital Markets.

Nike’s focus on wholesale partnerships is paying off as well. The North America wholesale business was down 8% in the quarter, better than the total company’s 12% sales decline. That isn’t just good news for Nike—it bodes well for companies like Foot Locker and Dick’s Sporting Goods, two of Nike’s biggest wholesale partners. Shares of both companies were up 2.4% and 4%, respectively, Friday morning.

All that to say, investors with a longer time horizon may want to get in on the stock before a broader inflection rally takes place.

“If this bellwether name can see improving top- and bottom-line trends over the next 12-24 months, the stock could finally regain its lost momentum and become a ‘story stock’ for calendar 2H [second half of 2025] and into 2026,” wrote Tom Nikic, an analyst at Needham Securities. He rates the stock a Buy, and raised his price target to $78 from $66 Friday.

To be sure, there’s still a bear case to be made. Telsey Advisory Group’s Cristina Fernández reiterated a Market Perform rating on Friday. While she says the company is making the right moves to improve business, she doesn’t see sales growing again on an annual basis until fiscal year 2027.

UBS’s Jay Sole also remains Neutral on the stock, even though he raised his price target to $63 from $56.

“We believe Nike is undergoing a major business reset that will take time to play out,” Sole wrote in a research note Friday.

That will limit the potential for raising per-share earnings estimates and likely will drag on the stock’s price-to-earnings ratio, he added.

Nike stock isn’t exactly cheap. Shares were trading at 39 times the next 12 months’ earnings Friday, above the five-year average of 29.5 times earnings.

Yet that doesn’t mean investors should shy away from the stock. A successful recovery could push valuation even higher further down the line. Plus, on a price-to-sales basis, Nike stock is still the cheapest it has been in 10 years, trading at about 2.3 times sales, notes Jefferies analyst Randal Konik.

“With shares near a valuation trough, we believe now is the right time to aggressively buy shares, seeing more than 75% upside from current levels with downside minimal at less than 10%,” he wrote Friday morning.

Write to Sabrina Escobar at sabrina.escobar@barrons.com