Truist downgrades Nike to Sell, says rally ignores ongoing risks

Truist has downgraded Nike to a "Sell" rating, maintaining its $29 price target on the stock. Analyst Joseph Civello believes the recent 19% rally in Nike's shares does not reflect improvements in the company's fundamentals, attributing the gains to sector rotations rather than underlying business performance. Nike's valuation has surged to 27 times earnings two years out, nearly double the average of its peers.

The analyst highlighted that issues with Nike's sportswear business, particularly its iconic franchises such as Air Jordan, Air Force 1, and Dunks, may still be underestimated. These problems have spread across Nike's Sportswear and Jordan divisions, which account for over 60% of the company's business. Civello noted that five out of seven recent Nike and Jordan product launches have been sold below retail prices.

Additionally, the analyst pointed out tougher comparisons in Nike's running division, where the company has seen success but is experiencing early signs of dwindling traction. Furthermore, Truist's new CFO Dave Denton has revised Nike's outlook for China downwards, expecting the situation to worsen throughout the year. Truist has also lowered its fiscal 2028 earnings per share (EPS) estimate to $1.30, which is below the street's consensus estimate of $1.50.