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Things have gone from bad to worse for Nike (NKE) and the stock is trading at the lowest level since the early days of the COVID-19 pandemic. The stock, which peaked in late 2021, has closed in the red for three straight years and is already down over 12% for 2025.
The company’s market cap has plunged below $100 billion and it is down nearly 63% from its all-time highs. In this article, we’ll discuss why Nike stock has been dropping and examine whether it would be smarter to buy the dip or steer clear.
Nike’s Sales Have Slumped for Four Straight Quarters
Nike’s fiscal Q3 2025 earnings provide a snapshot of what’s wrong with the sneaker giant. Its sales fell 9% year-over-year in its fiscal Q3, marking the fourth consecutive quarter of sales decline. The company also forecast sales to fall in the “low end” of the “mid-teens range” in the current quarter.
The company’s gross margins fell to 41.5% in the quarter, the lowest margins in over a decade excluding COVID-19 impacts in 2020. Nike expects its margins to compress further this quarter, causing its shares to plunge after the company released its earnings on March 20.
Why Has Nike Stock Dropped?
During the COVID-19 pandemic, Nike, under its then CEO John Donahoe – who has since been replaced with previous CEO Elliott Hill – made a deliberate decision to focus on sales through its own channels while cutting back on wholesale sales. The strategy worked wonders during the pandemic as Nike’s sales through its online channel skyrocketed. However, it backfired later once shoppers returned to third-party stores, where the company’s products were not well stocked.
Nike has also slacked on innovation and lost out to established brands like Adidas (ADDYY), as well as newer brands like New Balance, Hoka (DECK), and On Running (ONON). Its products did not perform well and the company was struck with unsold inventory that put pressure on its cash flows.
Nike is also facing intense competition in Greater China where its sales fell by a whopping 17% in the most recent quarter. China is increasingly becoming a tough market for Nike as domestic brands like Anta and Li-Ning have gained at the expense of foreign brands.
To make things worse, President Donald Trump has imposed additional tariffs of 20% on China and vowed reciprocal tariffs from April 2 on other countries. The tariffs would add to Nike’s costs which it hasn’t been able to fully pass on to customers.
Nike Is a Turnaround Play
Hill has been trying to turn around Nike under his “Win Now” plan. As part of the strategy, the company has been looking to mend relationships with third-party sellers and has increased marketing expenses to create demand. The company is establishing its direct channel as a premium destination. It is also revamping its sports portfolio and has been shedding excess inventory by offering discounts.
The ultimate goal is to reestablish the Nike brand and return to the full-price business which will help drive up margins. Meanwhile, like every corporate transformation, Nike’s turnaround has taken a toll on its financial performance in the short term which is particularly visible in its margins. Analysts expect the company’s earnings to fall over 46% in this fiscal year and 1.4% in the next fiscal year.
However, Nike expects things to bottom out in the current quarter. During the Q3 earnings call, CFO Matt Friend said that Q4 “will reflect the largest impact from our Win Now actions, and at the headwinds to revenue and gross margin will begin to moderate from there.”
Is Nike Stock a Buy or Sell?
While Nike would appear overvalued at a forward price-earnings (P/E) multiple of 32x, it would be prudent to look at the company’s long-term earnings capacity instead of the near-term numbers that are visibly depressed. To be sure, some of the headwinds on the competitive front – particularly in China – look here to stay, and during the Q3 earnings call Hill too acknowledged that the competition is quite intense.
It’s also true that the turnaround will take time and the company has no overnight fix. Nike’s earnings should however improve over the medium term as the company’s turnaround plays out and the stock should reward patient investors who can stomach the near-term weakness and volatility.
Nike Stock Forecast
After Nike’s Q3 earnings, several analysts lowered the stock’s target price. Previously, Nike earned an upgrade from DBS in early March and Jefferies in late February as both brokerages raised the stock by one notch to a “Buy”-equivalent. Billionaire investor Bill Ackman has also been building a stake in Nike and added more shares during Q4.
Overall, of the 34 analysts covering Nike, 17 rate it as a “Strong Buy” and two as a “Moderate Buy.” 13 analysts rate NKE as a “Hold” while the remaining two rate it as a “Strong Sell.” The stock’s mean target price is $82.84 which is 26% higher than the current price.
On the date of publication, Mohit Oberoi had a position in: NKE . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
