Wells Fargo Downgrades Nike Stock, Analyst Says New Tariff Headwinds, Looming Mild Recession Could Hurt Earnings

Shares of Nike Inc. (NKE) declined over 3% on Wednesday after Wells Fargo analyst Ike Boruchow downgraded the stock to ‘Equal Weight’ from ‘Overweight’ and slashed the price target to $55 from $75.

A contraction in the U.S. first-quarter GDP, which dragged benchmark indices on Wednesday, also appears to have weighed on Nike shares.

According to a CNBC report, the analyst highlighted new tariff headwinds and a potential looming “mild” recession as factors that could pose a material risk to Nike’s earnings and put the firm in a poor position to manage near-term headwinds.

“Downgrading to EW (from OW) given the turnaround is simply taking longer than hoped, while today’s macro concerns will likely kick the can even further out,” the analyst wrote, according to the report.

Boruchow also noted that the environment is not conducive to what CEO Elliott Hill needs to do to fix the model. “…without any real valuation support, we don’t think the stock can work,” he added.

Wells Fargo’s downgrade of Nike coincided with the release of U.S. GDP data, which showed the economy contracted 0.3% in March, marking the first quarter of negative growth since Q1 2022.

According to a CNBC report, economists surveyed by Dow Jones anticipated a 0.4% gain after the GDP rose by 2.4% in the fourth quarter of 2024.

The Bureau of Economic Analysis stated that the decrease in Q1 real GDP primarily reflected an increase in imports and a reduction in government spending. This was partly offset by increases in investment, consumer spending, and exports.

Following the disappointing GDP number, the S&P 500 and the Nasdaq Composite fell 2%, while the Dow Jones declined by 700 points, spooked by fears of a recession. The indices have since pared some of the losses from the knee-jerk reaction.    

The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, traded 0.84% lower on Wednesday morning, while the Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq Composite, traded 1.08% lower.

Also See: Etsy Stock Rises On Upbeat Q1 Revenue, Company Says It’s Staying Nimble In The Wake Of Tariff-Led Uncertainties

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