Nike price target raised to $68 from $57 at Citi on improved outlook

Citi raised Nike's (NKE) price target to $68 while maintaining a Neutral rating, citing better-than-feared Q1 sales guidance and strong holiday orderbooks driven by new products and distribution channels, despite weaker Q4 gross margins and expected continued weakness in direct-to-consumer sales through FY26. Nike's Q4 FY25 earnings and revenue surpassed forecasts, though overall revenue declined 12% year-over-year with a 440 basis point drop in gross margins. Concurrently, HSBC upgraded NKE to Buy, anticipating sales recovery and digital channel stabilization, contrasting with Citi's Neutral stance which notes the stock's 28x FY26 EV/EBITDA multiple and limited visibility.

Analysis

Nike's recent performance presents a complex picture, marked by divergent analyst ratings and mixed operational signals. The company surpassed Q4 FY25 expectations with revenue of $11.1 billion and EPS of $0.14, yet this represented a 12% year-over-year revenue decline and a significant 440 basis point contraction in gross margins. Forward guidance, while indicating a mid-single-digit sales decline for Q1, was better than market fears, suggesting a potential bottoming process. Key positive catalysts include rising holiday order books, driven by new product innovation and expanded wholesale distribution through partners like Amazon, which may offset persistent weakness in the direct-to-consumer channel projected through fiscal 2026. This has created a split in analyst sentiment: HSBC upgraded the stock to Buy, citing a clear path to sales recovery and imminent inventory cleanup, while Citi raised its price target to $68.00 but maintained a Neutral rating. Citi's caution is explicitly rooted in valuation concerns, highlighting a forward fiscal 2026 EV/EBITDA multiple of 28x and limited visibility into ultimate consumer adoption of new products.

Key Decisions for Investors

• Investors should weigh the early signs of a wholesale-led recovery, evidenced by strong holiday order books, against the persistent weakness in the direct-to-consumer channel and significant recent gross margin erosion.
• The current valuation, at a 28x fiscal 2026 EV/EBITDA multiple, warrants scrutiny, representing a key risk factor if the anticipated sales recovery and margin improvement fail to materialize as quickly as bulls expect.
• Monitor progress on the inventory cleanup over the next two quarters, as its successful completion is a critical catalyst for stabilizing margins and validating HSBC's bullish thesis on the stock's recovery.