3 Things You Need to Know About Nike Before You Buy the Stock

Core Insights - Nike's stock has significantly underperformed, trading 57% below its peak price from November 2021, indicating ongoing challenges for the company [1] Group 1: Company Struggles - Nike has faced major issues since the tenure of former CEO John Donahoe, particularly due to a strategic shift away from wholesale retailers towards digital and direct-to-consumer channels, which initially thrived during the pandemic but faltered as consumers returned to in-person shopping [2][3] - In Q2 2025, Nike reported an 8% decline in revenue and a 26% drop in net income year-over-year, highlighting the impact of these challenges under the new CEO Elliott Hill, who aims to focus on inventory management and a renewed emphasis on sports [4] Group 2: Brand Strength - Despite current challenges, Nike maintains a strong economic moat supported by its established brand presence and marketing prowess, bolstered by high-profile athlete endorsements and partnerships with sports leagues, including a renewed deal with the NFL through 2038 [5][6] - The company is recognized for its innovative product development, supported by a larger research and development budget compared to competitors, and has maintained an average gross margin of 44.6% over the past decade, indicating pricing power [7] Group 3: Valuation and Investment Opportunity - Nike's stock is currently trading 57% below its all-time high, with a 23.7 price-to-earnings ratio, which is 37% lower than its trailing 10-year average, suggesting a potential buying opportunity for investors [8] - Market expectations for Nike have become depressed, but if the new CEO can successfully implement a turnaround strategy, the current valuation may present an attractive investment opportunity [9] - Nike holds a 16.4% share in the global sportswear market, reinforcing its position as a leading brand in the apparel and shoe industry [10]