Nike (NKE) faces a longer path back to profitable growth as US tariffs, Greater China and the Converse business weigh on margins, RBC Capital Markets said in a research note Tuesday.
The brokerage lowered its fiscal 2026 and 2027 earnings per share estimates by roughly 10% and 8% and maintained a roughly $3 EPS forecast for fiscal 2028. RBC noted that US tariffs are expected to reduce fiscal 2026 gross margins by around 320 basis points or roughly $1.5 billion.
Nike's guidance for Q3 is "more cautious" with management forecasting a low-single-digit revenue decline and gross margins down 175 to 225 basis points year over year, reflecting ongoing challenges in China, Converse and other operational pressures.
RBC also highlighted recent insider share purchases following the post-earnings share price weakness. The purchases were made by CEO Elliott Hill and board members Tim Cook and Robert Holmes Swan, among others, which the firm sees as a positive signal.
The investment firm said the company's shares have de-rated following the post-Q2 sell-off, with valuation now closer to long-term historical averages, offering a more attractive entry point for investors.
RBC reiterated its outperform rating on Nike and lowered its price target to $78 from $85.
Shares of Nike were down 1.1% in recent trading.
Price: 63.83, Change: -0.70, Percent Change: -1.08
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