Down More Than 50% in 3 Years, Is Now Finally the Time to Buy Nike Stock?

Core Viewpoint - Nike's stock has underperformed the market in 2026, with a decline of about 1% compared to a 2% rise in the S&P 500, extending a three-year decline of over 50% [1] Financial Performance - Nike's financial results show a year-over-year revenue increase of 1% in both the first and second quarters of fiscal 2026, indicating some improvement compared to a 10% decline in fiscal 2025 [2][3] - However, significant weaknesses exist, particularly in direct-to-consumer sales, which fell 8% year over year in fiscal Q2, worsening from a 4% decline in fiscal Q1 [4] - Greater China revenue also declined by 17% year over year in fiscal Q2, compared to a 9% decline in fiscal Q1 [4] Revenue Breakdown - Wholesale revenue rose 8% year over year, an acceleration from 7% growth in the previous quarter, but this improvement is overshadowed by declines in direct-to-consumer and Greater China segments [5] - Direct-to-consumer sales are considered higher-margin, and their decline could negatively impact overall profitability, which saw a 32% year-over-year drop in net income in fiscal Q2 [6][7] Market Position and Competition - Nike's poor performance in China is concerning, especially as competitors like Lululemon are experiencing significant growth in the same market, suggesting a loss of market share for Nike [8] Future Outlook - The company is in a transition year, facing both transitory and structural headwinds that are affecting profit margins, as noted by the CFO [9] - Guidance for fiscal Q3 indicates expected revenue to decrease by a low single-digit percentage year over year, with gross margin expected to contract between 175 and 225 basis points [10] - Despite a significant decline in stock price, the current price-to-earnings ratio of 38 suggests that a successful turnaround may already be priced in, leading to a cautious outlook on buying the stock unless it declines further [12]