Investing.com -- Piper Sandler upgraded Nike (NYSE:NKE) to Overweight from Neutral, setting a price target of $90, up from $72 a share in a note Friday.
The decision reflects confidence in CEO Elliott Hill's strategic moves to clean up the marketplace, including taking back products and providing markdown support to partners.
However, Piper Sandler acknowledged that they are possibly early with the call.
Analysts at the firm believe Hill’s plan will lead to a "more visible recovery story entering FY26" despite the current negative sentiment, which has seen a 30% increase in short positions since September.
A key debate around Nike is the time required to transition back to a pull market through product innovation.
Piper Sandler's analysis, which considers a reduction in Classic franchise penetration and a shift towards an 80/20% full-price/off-price mix, suggests this recovery could be achieved within three quarters.
“The company appears to be thinking through the 80/20 full price/off price mix at brands like HOKA and On Running to improve its own 50/50 split coming into FY25: on our math, moving towards 20% off-price mix implies an additional ~$2B in sales shed in FY26; as a result, NKE's DTC becomes 14% of the mix vs. 25% in FY24,” said Piper Sandler.
The report highlights signs of progress, noting growth in Sport Performance categories such as Training, Global Football, and Baseball. Running has also shown positive momentum over the past two quarters.
Historically, Nike has demonstrated resilience and the ability to innovate at scale. Piper Sandler draws parallels to FY18, when Nike rebounded in North America’s footwear market by launching successful products like the Air franchise and Epic React.
While maintaining conservative sales and EPS estimates for FY25 and FY26, Piper Sandler sees potential for Nike to outperform.
The firm's bullish scenario envisions a share price of $100, while the bear case is for $58 a share.