Nike has gotten a downgrade. Will the World Cup save its stock?

Shares of sports retailer Nike at trading on June 10 were falling at a low of 3%: RBC analyst Piral Dadhania worsened their rating from "above market" (outperform) to neutral "meets market performance" (sector perform), writes CNBC. In addition, the target price for Nike securities Dadhania reduced from $70 to $50 per piece, specifies MarketWatch. The new target suggests their growth by 14% to the level of Wednesday's closing. According to the analyst, the company's recovery under the leadership of CEO Elliott Hill is progressing, but the progress "is slower than expected" in RBC.

Lending Nike's support in the near future could be the FIFA World Cup (World Cup), writes the Motley Fool, however. Although the sportswear giant is not an official FIFA sponsor, many top players, including Cristiano Ronaldo and Kylian Mbappe, have advertising contracts with it.

Piral Dadhania believes that recently in Nike's business, which is facing increased competition and lower demand, clear improvements are visible, but they are not yet massive and limited to only certain categories of goods, writes CNBC. In addition, he said, the company risks losing market share in some of the segments. For example, "the range of casual shoes from Nike still leads the market, but in the segment of running shoes price advantage is held by brands On Running, Hoka and New Balance", - explained the analyst, noting that "premium price positions in the segment of women's clothing are occupied by Vuori, Alo Yoga and Lululemon".

Ahead of Nike's quarterly report, expected on June 30, Dadhania believes the company could beat market forecasts thanks to World Cup-related sales. However, he does not expect any immediate improvement in the direct-to-customer sales segment. In addition, the analyst lowered Nike's expected earnings per share, citing weaker revenue growth and a slow recovery in profitability. "The speed of implementing product line changes and clearing inventory has not been as fast as we would have liked. It is unlikely that the remainder of calendar year 2026 will bring positive revenue growth for the company," Dadhania concluded.

The World Cup kicks off June 11 in the U.S., Canada and Mexico and runs through July 19, and hardly any American brand is more closely associated with the World Cup than Nike, according to the Motley Fool. In addition to advertising contracts with soccer players, Nike supplies shoes and uniforms to 12 national teams, including France, England, Brazil, the United States, Canada and the Netherlands, the publication notes.

So, concludes the Motley Fool, while the tournament may not have a significant immediate impact on the company's sales, the brand will gain huge visibility in the coming month - not only through the players on the field, but also on live TV and social media through Nike's new World Cup-themed ad campaign, Rip the Script. Its centerpiece is a six-minute video featuring a host of celebrities.

"We're also using the World Cup as an opportunity to give the soccer market a boost for the quarters ahead," Elliott Hill said during a teleconference following the fiscal third-quarter report. - By the end of the tournament, we will have increased representation in more than 5,000 soccer apparel stores worldwide - at wholesale partners and in Nike Direct."

Nike shares have lost more than 70% since peaks in late 2021. Since the beginning of the year, the securities of the sports retailer are down 31%. Wall Street generally takes a wait-and-see stance on Nike shares. Of the 39 analysts covering the company's securities, 20 recommend holding the securities in the portfolio. Another 17 maintain a positive view (Buy and Overweight ratings). Only two are negative - they advise to sell Nike securities (Sell rating).

This article was AI-translated and verified by a human editor