2026-09-27

Nike Stock Hits Fresh 12-Year Low at $35.75 as BofA Slashes Rating to Underperform, Cuts Target to $30 - and Flags a 107% Dividend Payout Ratio

Written & reviewed by the TradeSmrt editorial team · 2026-09-27

In this article

What Happened
Why BofA Turned This Bearish
Why October 1 Earnings Is the Next Real Test
What to Take Away From This
FAQ
Sources

What Happened

Before Friday's opening bell on September 25, Nike (NYSE: NKE) took another hit from Wall Street. Bank of America analyst Lorraine Hutchinson downgraded the world's largest sportswear maker two full notches, from Neutral to Underperform - effectively a sell call - and slashed her price target from $47 to $30, a cut of more than 36%. Shares dipped nearly 2% in premarket trading on the news, but the stock clawed back most of that move during regular hours, closing down just 0.67% at $35.75. Trading volume told a different story than the muted price action: 34.2 million shares changed hands, nearly 23% above the three-month average of 27.8 million, signaling considerably more investor attention and positioning than the flat closing print would suggest.

What makes this downgrade notable is where it landed. As we covered back on August 18, Nike shares fell to a 12-year low of $39.09 on the very day its new CFO started the job. Barely five weeks later, the stock is sitting even lower, at $35.75. In other words, Nike hasn't just found a bottom and stayed there - it has carved out a new 12-year low on top of the old one, and BofA's $30 target implies the stock could still fall another 16% or more from here.

Why BofA Turned This Bearish

Hutchinson's case for the downgrade rests on four specific pressure points. First, Nike's classic franchises - think Air Force 1 and Dunk, the shoes that have anchored the company's revenue for years - are seeing demand soften noticeably. Second, newer product launches haven't delivered the offsetting lift management was counting on; despite a reworked lineup under new leadership over the past year, the new styles simply aren't growing fast enough to cover for the legacy slowdown. Third, and perhaps most structural, is excess inventory in China, Nike's second-largest market, which BofA expects to keep forcing markdowns and squeezing margins for several more quarters. Fourth is a broader demand problem across the athletic footwear and apparel category generally - a headwind Nike shares with the industry rather than one unique to its own execution.

Those four factors led BofA to cut its fiscal 2027 and fiscal 2028 earnings-per-share estimates by 11% and 12%, respectively. The FY27 number is the one worth sitting with: $1.43 per share. Nike currently pays an annualized dividend of $1.60 per share ($0.40 quarterly). Run the math against BofA's lowered EPS estimate, and Nike's payout ratio - the share of earnings paid out as dividends - works out to roughly 107%. That means the company would be distributing more cash in dividends than it actually earns. A payout ratio above 100% is a structural red flag in equity analysis; it isn't sustainable indefinitely, and it's the kind of number that starts conversations about dividend freezes, cuts, or reduced buybacks well before either actually happens. By calling this figure out explicitly, BofA is questioning not just near-term earnings momentum but the durability of Nike's capital-return policy itself.

Why October 1 Earnings Is the Next Real Test

This downgrade lands less than a week before Nike reports fiscal 2027 first-quarter results (covering June through August), scheduled for Thursday, October 1 at 4:15 p.m. Eastern, right after the closing bell, with a conference call to follow at 5 p.m. A downgrade of this magnitude landing this close to a print typically does double duty in the market: it resets expectations lower ahead of the release, and it signals that at least one major bank has genuinely lost confidence in the near-term trajectory, not just the long-term one.

There's an added wrinkle here - this will be the first quarterly report delivered under Nike's new CFO, who took the job in mid-August. That makes October 1 a first real test of how the new finance chief frames guidance, and specifically what the company says about inventory normalization, gross margin, and capital allocation. If the quarter shows real progress on clearing Chinese inventory or a pickup in new-product sell-through, BofA's bearish scenario could look overdone in hindsight. If comparable sales disappoint again or guidance gets trimmed further, the 107% payout-ratio warning starts looking less theoretical and more like an early signal of what's coming.

The market's relatively calm reaction is itself worth noting. A price-target cut of more than a third, paired with a rating change to effectively "sell," is about as aggressive as an analyst call gets - yet the stock finished down less than 1%. That suggests a meaningful amount of bearishness was already priced in before Friday. Nike has set fresh multi-year lows repeatedly over the past several quarters, and a certain investor fatigue - the sense that "how much worse can it get" - had already taken hold ahead of this note. Whether that "it's already priced in" read holds up will come down to what the actual numbers and guidance say on October 1.

What to Take Away From This

Look past the size of a price-target cut and into what's driving it. BofA's $30 target matters less on its own than the EPS cuts (11-12%) behind it and the 107% payout ratio those cuts imply. Read past the headline number to the assumptions underneath it.
A payout ratio above 100% is a genuine warning sign, not just an analyst talking point. Paying out more in dividends than a company earns isn't sustainable long-term, and it typically precedes a dividend freeze, cut, or reduced buyback program. When evaluating any dividend stock, track the payout ratio trend alongside the yield itself.
A major downgrade landing right before earnings can be an expectations reset. Analysts sometimes lower the bar just ahead of a print, which can set up either a genuine "beat" or confirmation that the pessimism was warranted. The downgrade only means something once you see it against the actual results.
A stock that's already fallen a long way isn't guaranteed to have found a bottom. Nike hit a 12-year low in August and then broke below that level again in September. "It's already dropped so much" is a feeling, not a thesis - inventory levels, comparable sales growth, and guidance are the data points that actually confirm or deny it.

FAQ

Why didn't Nike stock fall more on the day of BofA's downgrade?

Shares dropped almost 2% in premarket trading but recovered most of that loss during regular hours, closing down just 0.67%. That suggests the market had already priced in a good deal of pessimism about Nike, though trading volume running 23% above average shows investors were still actively repositioning around the news.

What does a 107% dividend payout ratio actually mean?

Based on BofA's lowered fiscal 2027 EPS estimate of $1.43 per share, Nike's current annualized dividend of $1.60 per share would exceed its projected earnings. That means the company would be paying out more cash in dividends than it earns - a structurally unsustainable setup that often precedes a dividend freeze or cut if it isn't corrected.

When does Nike report earnings next, and what should investors watch for?

Nike reports fiscal 2027 first-quarter results (June-August) on Thursday, October 1 at 4:15 p.m. Eastern. Key things to watch: comparable sales growth, progress clearing excess China inventory, how new product lines are selling, and any change to full-year guidance - especially anything touching gross margin or the dividend.

Should I buy or sell Nike stock right now?

This isn't investment advice. BofA's downgrade is one bank's view among many, and the real direction will be set by Nike's actual October 1 results and guidance. Always check the latest filings and earnings data yourself before making an investment decision.

You may also find these related articles useful: Nike Stock Crashes to 12-Year Low of $39.09, Target Jumps Over 4% While Lowe's Falls 5.6%

Sources

This article is an original synthesis and analysis based on the reporting below, not a reproduction of the original articles. Please verify the latest figures and details directly with the source reporting.

⚠️ This article is for informational purposes only and does not constitute investment advice. Market conditions change constantly - always verify the latest information before making investment decisions.