Story Stocks^®

JP Morgan's (JPM) upgrade of NIKE (NKE) represents a significant vote of confidence for investors, especially given JPM's stature as a tier one firm. This move underscores the growing belief that NKE's "Win Now" turnaround strategy is gaining solid traction as the company emerges from its deepest slump in years. Shares are jumping sharply higher on this analyst action, reflecting market enthusiasm for the company's strategic pivot and renewed growth potential.

• A key development supporting this optimism is the new trade deal with Vietnam, announced in early July, which has alleviated concerns over substantial cost increases that could have forced NKE to either absorb higher expenses or raise prices, both of which risked impacting profitability and consumer demand. Previously, NKE had estimated a $1 bln cost impact in FY26 due to tariffs, a burden it was preparing to offset through price increases and supply chain adjustments.
• This trade agreement not only mitigates that financial pressure but also eases margin constraints, which have been suppressed by higher promotional activity aimed at reducing inventory. In 4Q25, gross margin plummeted by 440 bps yr/yr to 40.3%, with Q1 guidance anticipating a further contraction of 350-425 bps; however, with the largest financial impact of the "Win Now" strategy now absorbed, this development provides a clearer path to margin recovery.
• NKE's efforts to reinvigorate its product lineup through innovation -- a cornerstone of its turnaround plan -- are also showing promising signs of progress. Recent launches like the Pegasus Premium and Vomero 18 are gaining traction among runners, signaling a renewed focus on performance-oriented products that could strengthen its market position. After several months of clearing out outdated inventory, NKE's product line is now largely up to date, enabling improved pricing power and a more competitive stance, particularly against rivals like On Holding (ONON) and lululemon Athletica (LULU).
• Despite these positive developments, challenges remain, notably in Greater China, where revenue declined by 20% last quarter due to softer consumer demand, exacerbated by competitive pressures and nationalistic sentiment. This weakness could continue to weigh on overall growth if not addressed effectively.

JPM's upgrade to Overweight with a $93 price target serves as the catalyst driving NKE's stock higher today, reflecting the firm's increasing optimism about the "Win Now" turnaround plan. With the largest financial hurdles behind it and stronger results anticipated in the back half of 2025, NKE appears poised for a potential rebound, contingent on navigating ongoing regional challenges.