UBS has downgraded Nike Inc (NYSE:NKE) after the sportswear giant's worrying update last week, with the Swiss bank seeing "no quick rebound" in store.
The Oregon-based sneaker maker is embarking on what will be a multiyear reset of its business in order to return to healthy top-line growth rates, the bank told clients, seeing the risk of management providing further "guidedowns" in coming months.
"There is no easy way for Nike's margins to bounce back, in our view," said analysts.
UBS cut its rating to 'neutral' from 'buy', and set a new price target of $78 following the company's fiscal fourth-quarter report last Thursday, which highlighted that Nike's lifestyle business, which constituted 60% of business in the past year, needs a major reset.
The Swiss bank lowered its earnings per share estimates for 2025 by 26%, 2026 by 32%, and 2027 by 34%.
Overall, its projected five-year EPS compound annual growth rate has been reduced to approximately 3% from the previous estimate of 13%.
UBS believes this lower growth outlook justifies a reduced P/E ratio, now set at 22x compared to 27x prior.