In its latest research report, Bank of America maintained a buy rating on Nike with a target price set at $73, representing an upside potential of approximately 40% compared to the current share price of $52.07.
In its latest research report, BofA Securities maintained a Buy rating on $Nike (NKE.US)$ , setting a target price of $73, representing an upside potential of approximately 40% compared to the current share price of $52.07. The report, published on March 25, 2026, outlines key highlights for investors ahead of Nike's upcoming release of its fiscal year 2026 third-quarter earnings after market close on Tuesday, March 31 (Eastern Time). It also discusses the opportunities and challenges the company faces during its transformation phase.
North American Market Shows Initial Signs of Recovery, While China Market Continues to Face Pressure
In terms of regional performance, Nike is showing a clear divergence. After several quarters of adjustments, the North American market is finally showing positive signals. BofA analysts expect sales in this region to grow by 2% year-over-year in the third quarter, mainly due to the brand's continued investment in the local market and channel optimization.
However, the situation in the China market remains less optimistic. Following a 16% sales decline in the second quarter, analysts anticipate that the third quarter’s performance in the China market will be similar to the second quarter, implying that sales in the region may continue to decline at a double-digit rate. Bank of America specifically noted in the report that the difficulties facing the China market in the second half of the year have already been fully anticipated by the market, thus eliminating the possibility of any further "unexpected" shocks.
Notably, China's contribution to Nike's overall profitability is significantly declining—analysts estimate that the China market will account for only 11% of Nike’s EBIT in fiscal year 2026, far below the pre-pandemic level of 26%.
Sales in the Europe, Middle East, and Africa regions were largely flat in the first half of the year, with geopolitical uncertainty remaining a key variable affecting performance in the region. At the corporate level, Bank of America expects Nike’s total sales in the third quarter to decline by 0.4%, with currency factors contributing approximately 300 basis points of positive impact.
Gross Margin Under Dual Pressure
Gross margin is one of the core focuses of this research report. Bank of America pointed out that Nike is experiencing two interrelated factors in the third quarter: On one hand, the pressure on gross margin from the inventory clearance cycle is gradually easing; on the other hand, new cost pressures are emerging due to tariff policies.
Specifically, Bank of America expects the negative impact of tariffs on gross margin in the third quarter to reach 315 basis points, while progress on mitigation measures at the corporate level has been relatively slow, primarily because Nike remains cautious about raising prices during its transition period.
Taking these factors into account, analysts expect the gross margin in the third quarter to decline by 200 basis points year-over-year. However, Bank of America also sees a silver lining—with tariff mitigation measures accelerating in the fourth quarter, gross margin is expected to stabilize in that quarter.
Notably, products have been imported at the new rate of 10% for approximately two months now (previously around 20% before the IEEPA ruling), which could provide upside potential for gross margin in Q4 and the first quarter of fiscal year 2027.
New products for the World Cup act as short-term catalysts
At the product level, Nike is leveraging the popularity of the 2026 World Cup to drive sales. The company has already released home and away jerseys for 17 national teams this month, featuring Nike's latest Aero-FIT high-performance fabric.
According to the research report, this new material not only offers better breathability and heat dissipation but also provides more than twice the airflow volume compared to traditional Nike materials, making it the first elite-level high-performance fabric entirely made from textile waste. Bank of America believes that the launch of the World Cup series will help boost Nike’s sales performance in Q4 and the first quarter of fiscal year 2027.
Valuation at historical lows highlights long-term value
From a valuation perspective, Nike's current stock price already reflects a significant portion of pessimistic expectations. Data from Bank of America shows that Nike’s forward price-to-earnings ratio is currently about 24.5x, down from 31.0x last quarter and below its historical average of 30.1x since 2010. Relative to the S&P 500 Index, Nike’s P/E premium is only 1.26x, also lower than the historical average.
Bank of America’s target price of $73 for Nike is based on a 30x P/E multiple applied to fiscal year 2027 earnings per share of $2.40. This valuation multiple is broadly in line with Nike’s historical average, reflecting analysts’ confidence in the company’s earnings and sales inflection point.
Earnings forecasts and risk factors
According to Bank of America’s financial model, Nike’s earnings per share for fiscal years 2024 through 2028 are projected to be $3.73, $2.16, $1.39, $2.40, and $3.26, respectively. Earnings per share for fiscal year 2026 are expected to decline by 35.6%, but fiscal year 2027 is anticipated to see a strong rebound of 72.7%.
The research report also highlights both upside and downside risk factors. Upside risks include stronger-than-expected growth in innovative products, recovery in the Chinese market, and greater-than-expected improvement in gross margins. Downside risks include weak recovery in the Chinese market, poor market response to innovative products, and continued promotional pressures hindering gross margin recovery.
Overall, Bank of America believes that Nike is at a critical stage of transformation. Positive changes in the North American market have provided confidence for the company, while pressure on gross margins is expected to gradually ease over the next few quarters. For long-term investors, the current valuation level may present an attractive entry point.
Editor/Doris