Nike is mired in its longest bear market in 40 years, but UBS has found bullish signals

As Nike's stock price experiences a historic pullback, Apple CEO Tim Cook's significant increase in holdings, combined with UBS's latest survey data, suggests that this giant may be building a bottom, but a full recovery will take time.

Despite the generally low market sentiment, UBS analyst Jay Sole pointed out in a report to clients on Friday, the 26th, that UBS Evidence Lab's latest global sports apparel survey shows that Nike is showing a "bullish" trend.

UBS noted that the survey results indicate that the two key strategies implemented by Nike's new CEO Elliott Hill—"returning to wholesale channels" and "refocusing on athletic attributes"—are proving effective:

1. Improved Channel Availability: The proportion of global consumers who find Nike products "easy to find" in physical stores and online rebounded to a new high this year after declining from 2019 to 2022.

2. Return of Athletic Attributes: The proportion of consumers who believe Nike is "suitable for sports" has returned to peak levels seen in 2019.

Additionally, UBS highlighted five key data points indicating brand strength:

• Global NPS Leader: Nike has the highest Net Promoter Score (NPS) among all brands, ranking first in all four major surveyed regions (the United States, the United Kingdom, Germany, and China) and showing an upward trend.

• Strong Brand Attributes: Nike ranks first or second globally in categories such as "high-quality products," "suitable for sports," "well-known brand," "innovative brand," and "fashionable and cool."

• Increased Purchase Intent: Global consumers plan to purchase more Nike footwear and apparel in the next 12 months.

• Improved Brand Impression: Global consumers' impressions of the Nike brand are improving, and the speed of improvement is faster compared to other brands, with significant growth in the United States.

• Highest Loyalty: Nike has the highest customer loyalty and conversion rates globally.

Cook's Million-Dollar "Bottom Fishing," Insiders Cast Trust Votes

Meanwhile, against the backdrop of the company's stock price being deep in its worst bear market in forty years, there has been a notable buying action from the company's senior executives.

Wall Street Journal wrote that Apple CEO and Nike's lead independent director Tim Cook recently spent about $2.9 million to "bottom fish." According to SEC filings, Cook purchased 50,000 shares of Nike Class B stock at a weighted average price of $58.97 per share. After the transaction, Cook's total holdings in Nike reached 105,480 shares, nearly doubling his personal stake Aside from Cook, another member of Nike's board has recently purchased company stock.

This "real money" endorsement from the core team has been interpreted by the market as recognition of the company's long-term strategy and valuation, directly driving a significant rebound in Nike's stock price following the announcement.

Rating Maintained at "Neutral": The Road to Recovery is Long, Valuation Based on 2028 Expectations

Despite survey data showing positive signs, UBS analyst Jay Sole maintains a "neutral" rating on Nike stock.

UBS believes that the strengthening of brand power lays the foundation for Nike's eventual comeback, but this turnaround process will take longer than the market expects. The current stock price does not fully reflect the time cost required for recovery.

UBS has set a target price of $62, based on its forecast of $2.15 earnings per share (EPS) for the fiscal year 2028, applying a price-to-earnings ratio of 29 times.

Additionally, the survey revealed two moderately negative data points:

1. Decline in Awareness Among Young People: Among the 16-24 age group, Nike's global auxiliary brand awareness has experienced slight erosion. Analysts believe this may be due to Nike's brand popularity being less than in previous years.

2. Converse's Mediocre Performance: The survey results for the Converse brand are considered lackluster