Truist cuts Nike stock rating to sell on valuation concerns

Truist Securities has lowered Nike Inc.'s stock rating to Sell from Hold, maintaining its price target at $29.00. The downgrade comes after Nike shares surged 19% over the past month, surpassing the flat performance of the S&P 500. Truist Securities believes Nike's valuation has increased by 6 times to a forward fiscal year 2 price-to-earnings ratio of 27, nearly double the average of its peers.

The downgrade is attributed to a series of challenges facing the athletic apparel company. Truist noted the unsold inventory of retro Jordan products being sold below retail prices, limited visibility on when China sales will improve, and tough comparisons to World Cup sales and a significant sell-in to the U.S. wholesale channel in the past year.

Nike's Running category has also faced difficulties, with revenue declining by 1.2% over the past year. Despite this bearish assessment, InvestingPro analysis suggests Nike remains undervalued at its current price. Investors interested in a more in-depth analysis can access Nike's comprehensive Pro Research Report, one of 1,400+ reports that transform complex data into actionable intelligence.

Nike has recently faced scrutiny from various analysts following meetings with its new chief financial officer, with BTIG maintaining a Buy rating at $50.00 and StoneX keeping a Hold rating. UBS and Stifel have also provided their perspectives on Nike's future, with UBS expressing concerns about the length of Nike's turnaround and Stifel expecting a reset in financial outlook through fiscal 2031.