After 3 Years of Decay, Can We Expect a Turnaround ’25 From Nike’s Stock (NYSE: NKE)?

Nike's stock price (NYSE: NKE) has come under pressure from the bears through 2024, with a drop of 27.96% year-to-date seeing the firm lose some of it's lustre. This is not a one year story however, with the NKE price declining in each of the last three years. A glance at the 5 year chart below tells the tale.

Down 54% since the start of 2022, beleaguered holders of the stock are looking for a turnaround story, with the leadership of its new CEO, Elliott Hill potentially providing the catalyst.

In recent earnings, the company reported fiscal second-quarter revenue of $12.35 billion, surpassing the anticipated $12.13 billion, despite being a decrease from $13.39 billion the previous year. Earnings per share also outperformed estimates at $0.78 compared to predicted $0.63, although this was lower than last year's $1.03. Delivering ‘beats' on wall street consensus is certainly a good place to start rebuilding bullish sentiment.

This earnings report marks a pivotal moment as it is the first under the guidance of Elliott Hill, who rejoined the company 60 days ago after initially retiring in 2020. With a focus on strategic changes, Hill aims to steer Nike through challenging market conditions.

Any potential turnaround will not be without some setbacks. Nike's gross margin dipped by 100 basis points to 43.6%, influenced by applied discounts and variations in the sales channel mix. Brand revenue also experienced a decline, falling 7% year-over-year across all geographical sectors to $11.95 billion. Additionally, its direct-to-consumer business, Nike Direct, fell by 13%, which included notable drops of 21% in digital business and 2% in Nike-owned retail stores. Wholesale revenues fell 3% from the previous year, reflecting a challenging environment for retail operations.

In response, Nike plans to manage its inventory by clearing out excess stock, making way for upcoming seasonal and innovative product lines scheduled for fall and holiday 2025.

Looking forward, Elliott Hill is prioritising reinvestment with strategic partners, such as JD Sports, Dick's Sporting Goods, and Foot Locker. He is also boosting marketing support to strengthen Nike’s market position against competitors like On Holding, Skechers, and Hoka. Whilst the narrative is changing, it may be too early to call a turnaround just yet.

Analysts have come in en masse with revisions in recent weeks, setting out their expectations for the year ahead, and despite some bullish commentary, targets are largely coming down.

Bernstein lowered their PT to $102, Deutsche Bank to $82, as BofA, Wells Fargo and Truist all revised down to $90. There are few price targets that remain above the current 52 week high of $109.96, indicating a year of rebuilding may well be required before a more sustained push at 2026.

In a recent note, Citi indicated as much, with the report stating there may be more “near-term pain” in Nike, which in turn could lead to a more full recovery in FY 2026. The firm held their price target at $102, with the Buy rating unchanged.

The journey to recovery for Nike under Elliott Hill’s leadership is underway, with an emphasis on strategic collaborations and product innovation poised to be key drivers of potential growth. Whether that will be enough to bring back the bulls for 2025, or whether greater clarity is required on the turnaround story beforehand will be one to watch.