A Looming 'Mild' Recession Prompts Wells Fargo to Downgrade Nike to Equal Weight

Wells Fargo has decided to step back from its previously optimistic stance on Nike, downgrading the athletic apparel giant’s stock from “overweight” to “equal weight.” This shift in outlook reflects growing concerns about Nike's ability to navigate the current macroeconomic environment and operational challenges. Alongside the downgrade, analyst Ik Boruchow also lowered his price target for the stock to $55, down from the earlier forecast of $75.

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The downgrade comes in the wake of a difficult year for Nike shares, which have dropped 24% so far in 2025. Boruchow’s revised price target suggests that the stock could decline an additional 4% from where it closed on Tuesday. Nike's shares were already down nearly 1% in premarket trading on Wednesday, further underscoring investor concerns about the company's short-term outlook.

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Several factors influenced the analyst’s decision to pull back on Nike. Chief among them are new tariff pressures and the potential for a “mild” recession. Boruchow believes these economic headwinds could significantly impact Nike’s earnings and place the company in a vulnerable position as it works to stabilize its operations. These developments add fresh complications to an already challenging turnaround effort that has been slower than initially hoped.

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In fact, when evaluating stocks most exposed to these emerging risks, Boruchow identified Nike as one of the “most concerning.” He explained that the combination of sluggish progress on strategic improvements and mounting macroeconomic challenges makes it difficult to maintain a bullish stance on the company at this time.

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“The downgrade to equal weight reflects our belief that the turnaround is taking longer than anticipated,” Boruchow wrote in his note to clients. “Today’s broader economic issues are likely to delay progress even further. The current environment simply isn’t favorable for the kind of transformational work that CEO John Donahoe and his team need to carry out to revitalize the business model. Without solid valuation support, we find it hard to make the case that Nike’s stock can rebound meaningfully in the near term.”

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Despite the cautious outlook, Boruchow offered scenarios for both potential upside and downside. In his bull case, he sees Nike shares climbing to $70, which would represent a 22% gain from current levels. This optimistic outcome would likely depend on a successful turnaround, a more supportive economic backdrop, and improving consumer demand.

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However, in his bear case, he envisions the stock plunging to $30—a 48% drop—should Nike’s earnings deteriorate further under macro pressures and strategic missteps.

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Nike has been facing a series of operational and demand-related challenges over the past year. The company has grappled with uneven consumer spending trends, particularly in key international markets like China, where economic recovery has been slower than expected. Additionally, U.S. consumers have become more cautious with discretionary spending due to inflation and broader economic uncertainty, impacting sales of athletic wear and footwear.

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At the same time, Nike is attempting a significant internal restructuring to streamline operations, improve margins, and refocus on product innovation. While the long-term goals of this initiative are promising, execution has been uneven, and progress has lagged expectations. This delay in delivering meaningful improvements has further weakened investor confidence, especially at a time when external risks are growing.

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The added burden of tariffs could also cut into Nike’s profitability. If trade tensions escalate or tariffs remain in place longer than anticipated, the cost of doing business—especially manufacturing and exporting from overseas facilities—could rise, placing further pressure on margins.

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Boruchow’s comments suggest that while Nike remains a strong brand with long-term potential, the current environment is not ideal for a sustained recovery in its stock. Without clear progress on its internal transformation or a shift in macroeconomic conditions, the path forward looks rocky.

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In summary, Wells Fargo’s downgrade signals a more cautious approach to Nike, reflecting the challenges the company faces both internally and externally. While there is still room for potential gains if the turnaround gains traction, the risk of further downside cannot be ignored. Investors may need to exercise patience and closely watch how Nike navigates the coming months.

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