Nike (NKE) stock has closed in the red for three consecutive years. While the drop in 2022 can be attributed to weakness in the broader market, U.S. stocks were pretty strong in 2023 and 2024, with the S&P 500 Index ($SPX) rising by over 20% each year.
Nike stock peaked in November 2021 and trades at less than half its record highs. As is the case for most underperforming stocks, Nike is also trying to turn around the business. In this article, we’ll discuss whether Nike is a good turnaround stock to buy or whether investors should avoid this underperformer.
Turnarounds Are Not Easy
To be sure, there is no certainty that corporate turnarounds will succeed. They are usually meant to revive a company structurally and are not merely a cost-cutting exercise, even though reducing costs is often central to turnarounds.
As for Nike, the company bought back its previous CEO Elliott Hill to lead the company, replacing John Donahoe. In the process, it joined the ranks of FMC (FMC) Disney (DIS), and Intel (INTC), companies that all brought back former executives in hopes of transformation. Relying on past leaders is no guarantee of success, however, as we saw with Intel. The chip company failed to recover under Pat Gelsinger.
How Did Nike Get into Trouble?
During the COVID-19 pandemic, Nike made a deliberate decision to focus on sales through its own channels while cutting back on wholesale sales. The company also cut ties with some retailers, and the strategy seemed to pay off initially, with Nike reporting strong growth in direct sales, especially through its online channel.
However, cracks started appearing in the strategy in 2023, and Nike struggled to grow sales through the direct channel. By lowering its focus on wholesale sales, Nike inadvertently contributed to the growth of other brands that now seem to have gained at its expense. The sneaker giant also slacked on innovation, which was a damaging move as newer brands like New Balance, Hoka (DECK), and On Running (ONON) started making inroads with their products.
Then, there has been a gradual decline in Nike’s market share in China, where domestic brands like Anta and Li-Ning have gained at the expense of foreign brands.
Finally, to make things worse, President Donald Trump’s tariffs – both imposed and threatened – have complicated things for companies like Nike that import much of their goods from overseas.
How Is Nike Trying to Turn Itself Around?
During the fiscal Q2 2025 earnings call in December, Hill was quite forthcoming about the issues Nike has been facing and acknowledged that the company wasn’t “delivering inspiring stories.” He said the company lacked innovation, which led to it becoming “far too promotional.” He said that the company’s sales mix on its digital platform was divided equally between full-price and promotional sales which happens to be quite high.
Hill admitted that some channel partners felt alienated by its previous strategy of cutting down on wholesale sales and said that he connected directly with executives of several key partners including Dick’s Sporting (DKS), JD Sports, and Foot Locker (FL). Nike has doubled down on wholesale sales under Hill who said during the earnings call that Nike’s marketplace will be “consumer-led” and the company will put “our best product and presentation in the path of the consumer wherever they choose to shop.”
Hill termed sports as Nike’s “North Star” and admitted, “We lost our obsession with sport.” He however added, “Moving forward, we will lead with sport and put the athlete at the center of every decision.”
Nike is revamping its portfolio with new launches while managing the inventories of existing products. Earlier this week, Nike partnered with Kim Kardashian’s SKIMS shapewear clothing brand and will launch women’s fitness gear under the NikeSKIMS brand. The line should help Nike gain target women shoppers and expand its target market.
Focus on full-price sales, engaging with wholesalers, and the launch of new products should help Nike revive both its top line as well as the bottom line. However, sell-side analysts are not too convinced about the turnaround – at least on the company’s ability to show quick results.
NKE Stock Forecast
After attending an event with Hill recently, Citi downgraded Nike stock from a “Buy” to “Neutral” while slashing its target price from $102 to $72, which is below the mean target price of $83.
In its note, Citi said, “After discussing the key building blocks and challenges to achieve a turnaround, we no longer believe [fiscal 2026] will inflect the way we hoped, either on the sales or [earnings before interest and taxes] margin line.” Analyst Paul Lejuez finds NKE’s fiscal year 2026 estimates to be on the higher side which he said makes “turnaround timing much less visible, and we no longer have the patience or conviction to wait another year.”
However, while sell-side analysts have been somewhat lukewarm to Nike’s turnaround, billionaire investor Bill Ackman has been building a stake in Nike and added more shares during Q4.
Should You Buy or Sell Nike Stock?
Nike faces some serious headwinds in the short term, and some like tariffs are beyond its control. Moreover, the turnaround might not be reflected in the company’s numbers for at least the next few quarters. If anything, these measures could put a strain on the company’s earnings in the near term with analysts modeling a 48% fall in the company’s profits in the current fiscal year before predicting a 14% rise in the next year.
Dismal current earnings mean that Nike’s valuations appear ugly. However, I believe Nike remains among the most iconic brands globally, so I recommend sticking with the company for now. I find it cheap based on its long-term earnings potential which has been masked by its short-term troubles. However, there could be some more pain in the stock in the near term amid the noise over Trump’s tariffs which would add to Nike’s costs and by extension, its woes.
