Is Nike Stock Poised for a Sustained Recovery?

After an extended period characterized by profit warnings and declining forecasts, the athletic apparel behemoth is finally demonstrating clearer financial direction. A surprising reversal in analyst sentiment from Wells Fargo has captured market attention, suggesting the worst may be behind the company as new product categories show robust expansion. Could this signal the beginning of Nike's long-awaited operational turnaround?

While Nike's legacy footwear models have faced challenges, recently introduced lines are generating significant traction. During the first fiscal quarter, non-classic shoe models achieved growth exceeding 20%. This emerging strength could provide crucial momentum for CEO Elliott Hill's "Win Now" strategic initiative, potentially marking an inflection point for the company's performance.

The Vomero and Pegasus lines specifically are contributing fresh energy to Nike's product portfolio, contrasting with the difficulties experienced by older iconic models. This product diversification arrives at a critical juncture as the company seeks to reestablish consistent growth patterns.

Wells Fargo's Substantial Rating Upgrade

In a decisive move yesterday, Wells Fargo elevated its assessment of Nike from "Equal Weight" to "Overweight" while simultaneously raising its price target from $60 to $75. Analyst Ike Boruchow attributed this significant sentiment shift to improving transparency within Nike's financial operations.

"Nike has been trapped in a negative revision cycle for more than three years, but we anticipate this pattern will reverse over the coming 6-9 months," Boruchow stated in his analysis.

The investment bank has accordingly revised its earnings projections upward. For fiscal 2026, Wells Fargo now anticipates $1.70 per share, increased from previous estimates of $1.60. Looking further ahead to 2027, expectations have been raised to $2.40 per share, up from the prior $2.25 forecast.

Should investors sell immediately? Or is it worth buying Nike?

Legacy Product Lines Show Stabilization Signs

Nike's classic footwear models, particularly the Air Force 1 and Air Jordan 1 lines that previously suffered revenue declines exceeding 30% in recent quarters, are beginning to demonstrate early indications of stabilization. Boruchow projects that revenue contraction within the classics segment will moderate significantly, decreasing from the current $11.5 billion to approximately $9 billion by fiscal year 2026.

By the conclusion of 2026, Nike could potentially achieve revenue growth between 3-4%, accompanied by gross margin improvement of roughly 200 basis points.

Organizational Changes Signal Strategic Focus

Despite these encouraging developments, Nike remains a corporation undergoing substantial transformation. The company recently discontinued its pandemic-era "Wellness Week" program, which had provided employees with an additional week of vacation during August. Chief Human Resources Officer Treasure Heinle described this decision as responding to a "pivotal moment" requiring maximum operational concentration.

The upcoming December 18th earnings release for the second quarter will serve as a critical test. This reporting will reveal whether the stabilization of classic products continues and if emerging product lines maintain their growth trajectory.

Yesterday's trading activity, with 21.7 million shares changing hands—substantially above average volume—indicates that investors are increasingly confident in the athletic wear giant's recovery prospects.