1 Growth Stock Down 53% to Buy Right Now

It’s been a rough last two and a half years NIKE (NKE 0.27%) shareholders. Just when it looks like the stock might be on the road to recovery… it manages to hit an even lower low. The stock price is now 53% below its late-2021 peak, with room to drop further.

As they say, though, it’s always darkest before the dawn. Translation: As uncomfortable as it may feel to do so, now is the time to take the plunge at Nike. A long-awaited revival of brand power is brewing; better to be in too early than too late.

Not the Nike consumers knew and loved

As a quick refresher, Nike did well leading up to the COVID-19 crisis. It thrived even through the first half of the pandemic, but it was also a time of change for sportswear retail. Consumers fell in love with rival shoe brands such as On and Hoka, supply chain failures have presented inventory challenges, and after several years of solid growth, China has turned into a particularly challenging market. Nike also learned (the hard way) that it needed the third-party wholesale partners it had previously moved away from to complement its direct-to-consumer (DTC) business.

The company is still nursing these injuries. Ditto for investors.

Still, there’s reason for hope as Nike faces each of these headwinds one by one.

I’m finally fixing what’s broken

Take the recent rehiring of Tom Peddie as an example. After 30 years with the company, he retired in 2020. Now, he’s back as vice president of market partners. His primary task will be to find the optimal balance between the company’s wholesale and DTC efforts.

Nike also hopes to rekindle real interest in the brand by improving innovation.

It wouldn’t be fair to say that the company simply stopped innovating in the past few years. Something is clearly missing, though, even if the blame lies more on the marketing side than the design side of the business.

That explains why Nike executives uttered the word “innovation” more than 40 times during their fiscal fourth-quarter 2024 earnings call in late June, the context behind each mention indicating that more of it is now being made. One specific product resulting from the renewed innovation effort is the Dynamic Air, which is not just a sneaker, but a complete platform capable of facilitating other creative improvements in air-based foot cushioning. Consumer response to Dynamic Air — and other recent innovations — has been strong.

Image source: Getty Images.

Other improvements are more technical, but no less important.

Take inventory levels as an example. Nike began fiscal 2023 with an inflated inventory of nearly $9.7 billion. Although it took a deep discount last year to get rid of the product, the company has reduced the inventory to a more manageable $7.5 billion. Pushing more goods to third-party retailers has been key to this effort.

The 3% year-over-year growth in China revenue last quarter was also attributed to 15% growth in the wholesale channel. Revenue for the full fiscal year 2024 rose 4% in the region, reversing a 4% decline the previous year.

A good choice for aggressive, risk-tolerant growth investors

So can these developments be trusted as a sign that Nike is back on track?

Obviously, there are never any guarantees when it comes to investing. Still, as much as you can take the clues at face value, you should see all of the above as evidence that Nike is at least capable of — and likely will continue to — make a comeback. Management has identified the issues and is taking decisive action to resolve them. Finally, the management team is also fortunate to work with one of the most recognized brands in the world.

Data source: StockAnalysis.com. Chart by author. Note that Nike’s 2025 fiscal year began in June.

Even if you’re fairly bullish on the company’s turnaround, it’s not an ideal core pick that should constitute an oversized position in your portfolio. It still carries above-average risk and will almost certainly remain volatile.

However, with the stock halved from its all-time high, the upside potential still far outweighs the potential downside from current levels. Nike is a solid choice for the growth side of a portfolio.