Investing.com -- UBS has warned of a negative catalyst ahead for Nike, saying in a note Thursday that the sportswear giant's first-quarter results are likely to bring weak guidance and downward earnings revisions.

"We expect Nike's stock price to fall due to weak guidance," analyst Jay Sole wrote, forecasting a 5-cent miss on first-quarter earnings and an implied second-quarter outlook of 31 to 43 cents, below the Street's 53-cent estimate.

He also sees a risk management uses the report to reset full-year 2027 expectations lower ahead of its November investor day.

Sole said UBS's channel checks suggest Nike's global sales growth has deteriorated over the past three months, with pressure across U.S. and European direct-to-consumer sales, the European wholesale channel and China, alongside elevated promotions.

While sentiment on the stock is already bearish, short interest recently hit a five-year peak and the shares trade at 21 times forward earnings, versus a 34 times five-year average, Sole said the market still underestimates the scale of the coming downgrades.

"Our conversations with investors suggest the market underestimates the magnitude of the downward EPS revisions this print is likely to cause," he wrote.

The analyst said Nike's stock would likely fall if the company guides to fiscal 2027 earnings below the buyside consensus of around $1.55; UBS's own estimate is $1.30. The options market is pricing a move of about 8% around the event.

UBS lowered its price target 13% to $42 but kept a Neutral rating on the shares, expecting Nike to perform in line with peers over the next year.