On Friday, UBS has revised its price target for Nike Inc (NYSE:NKE) shares from $138 to $125, while retaining a Buy rating for the stock.
The adjustment comes after a reassessment of Nike's fiscal year 2026 earnings per share (EPS) estimates, which have been reduced by approximately 2% due to a more conservative sales forecast. This revision in sales outlook accounts for roughly 230 basis points of the reduction in the price target.
The remaining factor influencing the lower price target is a change in the price-to-earnings (P/E) multiple applied to Nike's stock, which has been decreased to 27 times from 29 times. This decision reflects concerns that Nike's business turnaround may take longer than initially anticipated.
Despite the cut in the price target, the analyst believes that a 27x P/E multiple is justifiable, given Nike's projected 13.5% compound annual growth rate in EPS over the next five years.
The evaluation by UBS suggests that the new $125 price target positions Nike's valuation on par with its industry peers when considering various financial metrics. These metrics include price-to-earnings, price-to-sales, and free cash flow yield, as outlined in the firm's analysis.
The comprehensive analysis by UBS, which includes both multiples analysis and discounted cash flow (DCF) valuation, supports the conclusion that a $125 price target is appropriate for Nike's stock.
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