It has been a rough stretch for Nike (NYSE:NKE), as the sportswear giant has been slipping and sliding throughout much of 2024 and into the current year. All told, the company’s share price has lost almost 40% over the last twelve months and is down some 20% year-to-date.
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Increasing competition and geopolitics have been combining to put pressure on NKE, as demonstrated in its most recent Fiscal 2025 Q3 earnings results. Indeed, revenues were down 9% while gross margins fell 3.3% to 41.5% year-over-year. Meanwhile, some of the company’s classic names – Air Force 1 and Air Jordan 1 – experienced elevated inventories, not exactly an encouraging sign either.
As the company gears up to share its Fiscal 2025 Q4 earnings later this week on June 26, things are looking a bit dour. Consensus estimates of $10.71 billion in revenues would be a 15% decline from Fiscal 2024 Q4, while the expected EPS of $0.12 would be a stark drop of almost 90% year-over-year.
Acknowledging the headwinds, investor Amrita Roy spots a diamond shining amidst the rough surroundings.
“While the macroeconomic environment continues to be turbulent in Nike’s main markets, which include North America and Greater China, amid rising competition, I believe it is a generational buying opportunity with an attractive risk reward,” explains the 5-star investor.
Roy is encouraged by the company’s “Win Now” strategy, which is looking to increase sales from new products to compensate for declines in Nike’s more historic franchises. These are focused on five fields of play – running, basketball, football, training, and sportswear – and major hubs in the U.S., China, and the United Kingdom.
“I believe the management may surprise investors to the upside should the momentum in its new product portfolio be sufficient enough to offset the declines from its classic franchise,” adds Roy.
Roy also reminds investors that consensus estimates point to a mid-single-digit revenue growth for Nike starting in FY 2027, while management is expecting an inflection point in FY 2026.
Needless to say, Roy has confidence in Nike’s future performance, and the investor calculates that NKE has an upside of 34% from current levels. Not surprisingly, Roy is rating NKE a Buy. (To watch Amrita Roy’s track record, click here)
There’s clearly some optimism on Wall Street as well. With 12 Buy and 11 Hold ratings, NKE enjoys a Moderate Buy consensus rating. Its 12-year average price target of $71.24 has an upside just shy of 20%. (See NKE stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.