Morgan Stanley: Nike’s revenue reset may persist; FY2031 EPS expected below consensus

How long could Nike’s revenue reset last?

Morgan Stanley expects Nike’s revenue base to reset to about 40 billion dollars, below actual revenue of 46.4 billion dollars in fiscal 2026 and about 15% below the market consensus of 47.3 billion dollars for fiscal 2031; the firm believes the revenue reset could last at least another two years.
The three approaches produce similar estimates: about 41 billion dollars based on business categories, about 42.2 billion dollars based on regions, and about 36.6 billion dollars by reference to the average declines in revenue after six companies peaked. The average decline in historical cases was about 29%, and the reset is still under way in some cases.

The firm estimates normalized Sportswear revenue at about 17 billion dollars, below the current level of about 22 billion dollars; it estimates Jordan at about 5 billion dollars, below the current level of about 7 billion dollars. Both would contract by about a quarter.
Performance has room to grow, with estimated revenue of about 18 billion dollars, above the current level of about 16 billion dollars, but not enough to offset the declines in the other two businesses. Adding Converse and the company’s other businesses to the category estimates gives estimated revenue of about 41 billion dollars.
Growth in Performance is also constrained by the product mix: weighting participation in each sport and consumers’ association of Nike with each sport, the firm estimates participation growth at 2.6%, below the industry-wide 3.4%, because Nike has stronger associations with slower-growing sports.

In its regional model, Morgan Stanley assumes that the annual pace of share loss over the next five years in North America, Europe, the Middle East and Africa, and Asia Pacific and Latin America will be half the rate observed from 2023 to 2025, yielding fiscal 2031 revenue of about 36.4 billion dollars outside Greater China.
For Greater China, the model assumes that the underlying business, excluding the impact of online distributors exiting, will grow by about 2% annually starting in fiscal 2028, and that about half of the online sales affected by distributor exits will be recovered, implying fiscal 2031 revenue of about 4.8 billion dollars. The relatively smaller impact from online channels is one potential positive factor cited by the firm.

Using peer comparisons, regression analysis, and historical cases of intensifying industry competition, the firm estimates Nike’s normalized EBIT margin at about 9.5%, close to market consensus for fiscal 2031; its below-consensus earnings view is driven mainly by revenue scale.
At revenue of 40 billion dollars and a margin of 9.5%, EBIT would be about 3.8 billion dollars and EPS about 2.05 dollars; market consensus for fiscal 2031 is EPS of 2.45 dollars.
In a more optimistic scenario, revenue of 42 billion dollars and a margin of about 11% would produce EPS of about 2.50 dollars; in a more pessimistic scenario, revenue of 32 billion dollars and a margin of about 8% would correspond to about 1.40 dollars.

Nike’s Investor Day is expected to be held on 17 November 2026. Morgan Stanley believes management may set more ambitious long-term targets, but the firm views a return to the industry’s historical mid-single-digit revenue growth and Nike’s historical margins as an optimistic scenario.
The firm maintains its Underweight rating and cuts its price target from 27 dollars to 25 dollars; it is concerned that earnings expectations will continue to be revised downward while valuation multiples contract. Compared with the closing price of 38.48 dollars on 3 November, as cited in the report, the new target is about 35% lower.