NKE rallies as Jefferies upgrades stock and raises price target: should you buy?

Nike shares (NKE) surged nearly 5.75% to $80.90 after Jefferies upgraded its rating on the stock to “buy” from “hold” and significantly raised its price target by 42% to $115.

According to the brokerage, NKE’s renewed focus on innovation will balance inventories, boost wholesale distribution, and lead to higher sales and profits, especially since market expectations are currently low.

Analyst Randal Konik owed the upgrade to the shoemaker’s resilience and strong brand presence despite past missteps.

Nike appointed former senior executive Elliott Hill as CEO in October 2024, signaling a return to its core strengths.

With more than 50% of potential buyers still choosing Nike for athletic footwear, Konik believes new leadership will strengthen product direction and restore balance between direct-to-consumer and wholesale strategies.

The company has undergone significant strategic shifts following a disappointing 2024, during which its stock fell nearly 30%.

However, recent developments suggest that Nike is repositioning itself for a comeback.

Bill Ackman’s Pershing Square increases Nike stake

Apart from the upgrade, Nike has recently received another boost in the form of Billionaire investor Bill Ackman’s hedge fund, Pershing Square steadily increasing its stake in the company, making it the firm’s fifth-largest holding at just over 11% of its portfolio.

Ackman’s continued buying suggests strong conviction in Nike’s long-term prospects despite its recent struggles.

Nike’s decline from its 2021 peak has been dramatic, with the stock losing over 50% of its value.

However, Ackman appears to see this as an opportunity. His fund previously profited from a Nike investment in 2017-2018, making roughly $100 million.

While Ackman has remained relatively quiet about Nike since opening his position in mid-2024, his firm’s latest filings indicate growing confidence in the company’s turnaround strategy.

Nike SKIMS collaboration expected to bring fresh momentum

Nike is not just relying on leadership changes to reignite growth—it is also making significant moves in marketing and partnerships.

In a bid to reclaim its brand dominance, the company aired its first Super Bowl commercial in 27 years in February, signaling an aggressive return to major advertising.

Additionally, Nike recently announced a high-profile collaboration with SKIMS, the shapewear brand co-founded by Kim Kardashian.

The joint venture, set to launch in the spring, is expected to bring fresh momentum to Nike’s apparel business.

SKIMS has grown rapidly since its founding in 2019, generating around $1 billion in annual sales and expanding into physical retail locations.

The brand’s success in offering inclusive sizing and trendy designs could give Nike an edge in the competitive athleisure market, where rivals like Lululemon have gained ground.

Nike’s financial strength supports comeback potential

Despite recent sales declines, Nike remains a financial powerhouse.

The company holds $9.7 billion in cash, exceeding its total debt of $9 billion. This financial flexibility allows Nike to invest in product innovation, marketing, and strategic partnerships without excessive risk.

From a valuation perspective, Nike’s stock trades at a price-to-sales (P/S) ratio of 2.3, its lowest in over a decade.

Historically, the stock has averaged a P/S ratio of 3.6, suggesting significant upside potential if the company successfully executes its turnaround strategy.

Nike’s deep brand equity, extensive sponsorship deals with major sports leagues, and a resilient global supply chain position it well for a potential recovery.

According to data compiled by LSEG, the average rating of 39 analysts for NKE is “buy”, with a median price target of $90.

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