Nike Stock: Buy, Sell or Hold?

NIKE (NKE 0.07%) has dominated the sportswear industry for more than a generation, but the sneaker king is looking surprisingly vulnerable these days.

Revenue growth has stalled and the company is retreating from its direct-to-consumer strategy, admitting it made a mistake by shedding its wholesale relationships with retailers such as Foot Locker.

Indeed, its revenue is down — down 2% in its fiscal fourth quarter, which ended May 31, and the stock is down, now more than 50% off its peak in 2021. But is Nike stock poised for a turnaround or will it head even lower?

Let’s take a look at the arguments for buying, selling or owning Nike stock to determine which is the best move today.

Image source: Getty Images.

The case for buying Nike stock

At this point, it’s difficult to make a case for buying Nike stock based on the numbers alone. Revenue fell 2% in the most recent quarter, and the company expects tougher times in fiscal 2025, calling for revenue to decline by a single-digit percentage.

Nike has blamed some of these problems on weak demand for consumer discretionary goods, and there is some truth to that. However, rivals like it On Holding and Deckers Hoka quickly takes market share from Nike and fills the gap it left in the wholesale channel.

Nike has faced challenges before and successfully bounced back. By the mid-2010s, it was losing ground to the front sneakersbut a new strategy focused on bringing new products to market faster helped the company return to solid growth.

Nike seems to be looking for a turnaround strategy these days, but investors could reap a nice reward for taking a risk on the stock at its current valuation. Nike now trades at a price-to-earnings ratio of 21, but the company has the potential to significantly improve its earnings if the business starts to improve.

Buying the stock today might require a leap of faith, but if Nike’s business starts to improve, the stock has plenty of room to run.

Case for selling Nike shares

Besides the weak numbers, there are other reasons to sell Nike stock. First, the drop in his income was not a freak accident. It was a consequence of poor strategic planning and a management team that now appears to be on the hot seat, although co-founder and major shareholder Phil Knight expressed his support for CEO John Donahoe.

The strategy of trying to modernize the business around the direct-to-consumer channel and move from brand marketing to performance marketing appears to have backfired. Meanwhile, the company has underinvested in its products and is probably losing brand relevance.

With or without a new management team, these issues will be difficult to resolve, and Nike could face a multi-year turnaround effort that may not pay off.

Rather than wait to see what happens or wait for another guidance cut, investors may be better served by exiting the stock and investing elsewhere.

Case for owning Nike shares

Right now, the best way to approach Nike seems to be with patience. It seems like a mistake to sell a stock that has been such a big winner throughout its history, has significant brand upside and has an unrivaled roster of athletes as endorsers.

Billionaire investors also seem to be noticing the discount at which they are trading. For example, Bill Ackman’s Pershing Square fund bought Nike shares in the second quarter, most likely to take advantage of its depressed valuation.

With the stock price down so far, eliminating volatility could be the best move for current Nike investors.

Which is the correct choice?

Right now, owning Nike stock seems to make the most sense. There’s no doubt the business faces challenges, but Nike has the brand power to bounce back, regain valuable wholesale relationships and reinvent itself.

It may take some time to materialize, but the stock has fallen far enough that there will be substantial upside if Nike can return to its historical growth rate.