Nike’s CEO is stepping down, and some on Wall Street don’t seem to be taking the news very positively. After the market closed Thursday, the sneaker giant announced that CEO John Donahoe will retire on Oct. 13. Elliott Hill, who worked for the company for 32 years before retiring in 2020, will take over the post the following day. While UBS sees the change as a positive for the stock in the short term, adding that Hill has the potential to return Nike to growth, the firm warns that any upside momentum may already be losing steam. “With that catalyst now in the past, we expect the market’s focus to turn to Nike’s fundamentals and the Oct. 1 earnings announcement,” analyst Jay Sole wrote in a note to clients Thursday. “We think sentiment may become more bearish as the market recognizes that Nike’s fundamentals are likely not good … and there are likely no quick fixes to Nike’s problems.” Sole maintained his neutral rating on the stock and has a $78 price target, representing more than 3% downside from Thursday’s closing price. This year, Nike shares are already down about 20%. NKE YTD Mountain NKE, Year-to-Date Morgan Stanley called the change “not surprising” given that the company still has a “big mountain to climb.” The investment firm thinks a reduction in Nike’s annual guidance is likely as part of its upcoming first-quarter fiscal 2025 earnings report. If estimates are cut, analyst Alex Straton speculates the stock’s positive but “somewhat muted” reaction to the change could fade as investors come to terms with the fact that the company’s fundamentals may initially deteriorate over the next year before improving. Straton has an equal-weight rating on the stock with a price target of $79, or more than 2% downside from Thursday’s closing price. Others, however, have become more bullish on Nike following the decision. Wells Fargo maintained its overweight rating and raised its target by $9 to $95, implying more than 17% upside. “We expect range-to-market increases in line with Hill’s hire — as leadership has been a major point of contention and controversy surrounding the stock,” analyst Ike Boruchow wrote in a note. “Additionally, there are positive signs in the wholesale space (including positive comments from companies like DKS, FL, ASO and JD Sports) as one can argue that most of the bad news in this story is largely behind us at this point. With the announcement of a CEO change, bulls are now gaining visibility.” Bank of America also maintained its buy rating, believing it is a first step in the company’s turnaround. Bernstein, which rates Nike at outperform, expects the turnaround “will take time” but said market sentiment will be benevolent. Their targets imply upside of more than 28% and 34%, respectively, at Thursday’s close. “A lot still needs to change, including making a slow design process more flexible, reinstating feedback loops to understand changing consumer tastes, and retiring outdated products to make room for new innovations,” Bernstein analyst Aneesha Sherman wrote in a note on Thursday. “However, we believe the market will be more forgiving of a slow and steady pace of change if it has confidence in the right leadership.”
