On Thursday, UBS reiterated its Neutral rating on Nike (NYSE:NKE) stock, maintaining a $73.00 price target. The firm's analysts highlighted concerns about potential near-term earnings risks due to inventory management and product pipeline issues. UBS analysts pointed out two main reasons for caution: the potential underestimation by the sell-side and market of the time and cost required for Nike to normalize inventory levels, and the possibility that Nike's new product pipeline may not replenish as quickly as anticipated.
According to UBS analysts, Nike is likely in the initial stages of an 18-24 month cycle for new product innovation. This period is critical for the development and introduction of new offerings, which can influence the company's performance. Despite these short-term challenges, UBS maintains a Neutral stance on Nike shares, underpinned by the strength of the Nike and Jordan brand names.
The UBS Evidence Lab's 10th global athletic wear survey provided supporting data for the firm's position, indicating that the images of the Nike and Jordan brands remain robust among consumers. This brand strength is seen as a key asset for Nike, providing a solid base for the company's potential recovery.
UBS analysts believe that the enduring appeal of Nike and Jordan brands is a significant factor that could enable Nike to navigate through current challenges and eventually make a strong comeback. The price target of $73.00 reflects UBS's assessment of Nike's stock value based on these considerations.
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