Nike guides this year's earnings to $1.15 to $1.35 a share, down about 40%. At $34.71 the stock costs about 28 times that. I expect $36.25 in a year, so it should roughly track the market.
Key points
- $1.25 a share is my fiscal 2027 earnings estimate, the middle of guidance, versus $2.10 last year.
- 28 times earnings is what the stock costs on that figure, high for a shrinking business.
- $36.25 is my 12-month target, 4% above the price, plus a 4.7% dividend.
The call
The market is about right: it expects a trough soon. At $34.71 the stock costs 28 times this year's guided earnings, so investors already look through a year of falling revenue and a worsening China.
I believe the recovery is real but slow. Management pushed the China cleanup to "multiple seasons" and extended Sportswear and Jordan work past this year. Earnings of about $1.45 a share in fiscal 2028 look reasonable, not a rebound.
Diluted EPS by fiscal year ($ per share)Source: SEC XBRL filings; FY27E and FY28E are my estimates (FY27 guidance $1.15 to $1.35).
Valuation
| Item | Figure |
|---|
| Fiscal 2027 revenue (down high single digits) | about $42.7 billion |
| Fiscal 2027 adjusted earnings per share | $1.25 |
| Fiscal 2028 earnings per share | $1.45 |
| Multiple in 12 months | 25 times |
| Target price | $36.25 a share |
I use 25 times because earnings are depressed and a recovery deserves a premium to the market. The dividend of $1.64 a share exceeds free cash flow, so it is not covered by cash today. Upside of 4%, plus a 4.7% dividend, roughly matches the market, so Hold. The stock fell 50% in a year, so the downside from cuts is partly paid for. A recovery sooner than I expect would be the bigger surprise.
Risks
- Sell-through (shoppers buying from stores) in Sportswear and China stays weak and guidance is cut again; watch the Q2 report and the November Investor Day.
- The dividend is cut or debt rises: S&P cut the credit rating to A with a negative outlook, and $2 billion of bonds mature by March 2027.
- Upside: performance running and basketball launches, such as LeBron 24 on November 17, lift orders sooner than I expect.
What would change my mind
Two quarters of rising Greater China and Sportswear sales would move me to Buy; a dividend cut or a lower full-year guide would move me to Sell.