Nike is trapped in its longest bear market in forty years, but UBS has found bullish signals.

Nike is trapped in its longest bear market in forty years, but UBS has found bullish signals.

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As Nike's stock price experiences a historic pullback, the major purchase by Apple CEO Cook combined with the latest UBS survey data suggests this giant may be building a bottom, but a full recovery will take time.

Despite generally depressed market sentiment, UBS analyst Jay Sole pointed out in a report to clients on Friday, 26th, that the latest UBS Evidence Lab global sportswear survey shows Nike is showing a "bullish" trend.

UBS indicates that the survey results show two critical strategies implemented by Nike's new CEO Elliott Hill—"returning to wholesale channels" and "refocusing on sports attributes"—are working:

  1. Channel availability improvement: The percentage of global consumers who say Nike products are "easy to find" in physical stores and online has rebounded to a new high this year after declining from 2019 to 2022.
  2. Return to sports attributes: The percentage of consumers who believe Nike is "suitable for sports" has returned to the peak level of 2019.

In addition, UBS listed five key data points indicating brand strength:

  • NPS ranked first globally: Nike’s Net Promoter Score (NPS) is the highest among all brands and tops the list in all four major surveyed regions (US, UK, Germany, China) with an upward trend.
  • Strong brand attributes: Nike ranks first or second globally in categories such as "high-quality products", "suitable for sports", "well-known brand", "innovative brand", and "stylish and cool".
  • Rising purchase intention: Global consumers plan to buy more Nike footwear and apparel in the next 12 months.
  • Improved brand impression: Global consumer impressions of the Nike brand are improving, and the rate of improvement is faster than other brands, especially in the US.
  • Highest loyalty: Nike has the highest customer loyalty and conversion rates worldwide.

Cook's Million-Dollar “Bottom Fishing”, Insiders Cast Vote of Confidence

At the same time, as the company’s stock price is mired in the worst bear market in forty years, significant buy actions have appeared among company insiders.

WallstreetCN wrote that Apple CEO and Nike's lead independent director Tim Cook recently spent about $2.9 million to "bottom fish." According to SEC documents, Cook bought 50,000 shares of Nike Class B stock at a weighted average price of $58.97 per share. After the transaction, Cook holds a total of 105,480 NIKE shares, nearly doubling his personal stake. In addition to Cook, another member of Nike’s board has also recently purchased company stock.

This endorsement from the core team with real money has been interpreted by the market as recognition of the company’s long-term strategy and valuation, directly driving a significant rebound in Nike’s stock price after the news was released.

Rating Remains “Neutral”: Long Road to Recovery, Valuation Based on 2028 Forecast

Although survey data show positive signs, UBS analyst Jay Sole still maintains a “neutral” rating for Nike stock.

UBS believes that the strengthening brand is laying the groundwork for Nike’s eventual comeback, but the process of turning losses into profits will take longer than the market expects. The current stock price does not fully reflect the time cost required for recovery.

UBS sets a target price of $62, based on its forecast of earnings per share (EPS) of $2.15 for fiscal year 2028 and a price-to-earnings ratio of 29x.

Additionally, the survey also revealed two mild negative data points:

  1. Decline in youth awareness: Among the 16-24 age group, Nike’s global aided brand awareness has slightly eroded. The analysis attributes this to Nike’s brand heat not being as strong as it has been in recent years.
  2. Converse performance mediocre: The survey results for the Converse brand are considered to lack highlights.

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