Buy the Dip or Bail? One Investor Weighs In on Nike Stock (NKE)

Last week was one that Nike (NYSE:NKE) investors would prefer to forget.

The stock tumbled ~15% following the company’s latest fiscal third-quarter report, but the headline reaction doesn’t quite tell the full story. The quarter itself was actually solid, with revenue of $11.28 billion coming in slightly ahead of expectations, while diluted earnings per share came in at $0.35, topping Wall Street estimates by about $0.07.

What really weighed on investor sentiment was the outlook. Management indicated that the turnaround is taking longer than anticipated and said it expects current-quarter revenue to decline in the mid-single-digit range, roughly 4% to 6%, versus Wall Street expectations that had called for a return to growth. The company also indicated that gross margins will remain under pressure as it leans on promotions to clear excess inventory, while demand in China continues to lag.

And yet, one investor, known by the pseudonym IWA Research, isn’t deterred. In fact, the 5-star investor believes that the drop creates a compelling opening.

“Valuation now offering a solid margin of safety while [the company’s] turnaround advances, with solid fundamentals and potential to improve alongside the environment,” IWA opined.

Part of that confidence stems from Nike’s financial footing. The investor points out that the company maintains a strong balance sheet, with current assets comfortably covering both near-term obligations and long-term debt – a position that provides flexibility as it works through the reset.

The investor also argues that Nike’s reorganization efforts are ongoing, though with the “first fruits” expected in spring 2027, patience is clearly required. For those with longer-term horizons, however, there are numerous reasons to be optimistic, IWA points out.

Moreover, driven by potential macro improvements, share buybacks, direct-to-consumer growth, and portfolio optimization, IWA is modeling a conservative 6.5% CAGR through 2030.

The investor therefore arrives at an equity value of $77.39 billion, which translates into an intrinsic value of $52.22 per share. That’s about 18% higher than where NKE is currently trading.

“The risk-reward is finally attractive following this significant drop, falling to some of their lowest levels in over a decade,” adds IWA, justifying a Buy rating. (To watch IWA Research’s track record, click here)

That’s by and large where most of Wall Street finds itself these days. With 15 Buys and 9 Holds, NKE enjoys a Moderate Buy consensus rating. Its 12-month average price target of $62.05 paints an even more bullish picture, pointing to 40% upside from here. (See NKE stock forecast)

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.