Nike Stock (NKE) Bears Gifted with Timely Profit-Taking Opportunity

After a challenging run since 2021, Nike (NKE) is showing signs of life, surging nearly 20% following a solid earnings beat and early indications of a turnaround. The company exceeded expectations and highlighted progress in its recovery strategy, fueling renewed investor enthusiasm.

However, I remain cautious. While the results are encouraging, Nike continues to grapple with intense competition, operational challenges, and a valuation that appears stretched. Given these concerns, selling into the rally may be a more prudent approach than chasing the rebound. Despite the goodwill cheer on Wall Street, I remain Bearish on NKE stock.

Why Nike’s Stock Has Slid Since 2021

For those less familiar with the situation, here’s some context: Even after its recent rally, Nike stock remains down about 60% from its all-time high of $179.10 in November 2021. The reasons are a combination of strategic missteps and external headwinds.

Under former CEO John Donahoe, Nike shifted aggressively toward a direct-to-consumer (DTC) model, scaling back its relationships with key wholesale partners, including Foot Locker (FL). This move inadvertently created space for rising competitors such as On (ONON) and Deckers Brands’ Hoka (DECK) to expand their presence in retail outlets. At the same time, the company faced a sluggish Chinese market, where nationalist consumer sentiment favored domestic brands, compounding challenges abroad.

Add broader macroeconomic pressures—like inflation and persistent supply chain disruptions—and Nike’s growth trajectory faltered. Revenue fell from $51.4 billion in fiscal 2024 to $46.3 billion in 2025, a 10% decline, while net income plunged by 44%.

A Glimmer of Hope for Nike in Q4 2025

In an unexpected turn of events, last week’s fiscal Q4 earnings offered a rare dose of optimism. Nike announced revenues of $11.1 billion, beating estimates by $380 million despite a 12% year-over-year drop. Earnings per share came in at $0.14, also topping forecasts by $0.02.

Inventory levels held steady at $7.5 billion, a sign that the company’s aggressive clearance efforts are starting to stabilize. CEO Elliott Hill, who took the helm last October, emphasized the “Win Now” strategy, focusing on rekindling wholesale partnerships and doubling down on sports-focused innovation.

I see early traction in Hill’s plan to refocus on athletes and performance products, with excitement around upcoming signature shoes for WNBA stars like Caitlin Clark. Nike also expects sales declines to moderate in fiscal 2026, projecting a mid-single-digit drop for the current quarter, better than the feared low-teens decline.

Persistent Challenges and Rising Competition

That said, it’s important not to get ahead of ourselves—Nike still faces several significant challenges. Competition is intensifying, particularly from agile brands like On and Hoka, which are steadily eroding Nike’s market share in the running category. These upstarts are gaining traction with innovative product designs and focused marketing that resonate with both performance runners and younger consumers.

Nike’s struggles in China also remain a concern. Sales in the region dropped 21% in Q4, pressured by growing competition from domestic brands and lingering inventory issues. Additionally, the newly imposed tariffs are expected to cost the company an estimated $1 billion in fiscal 2026, adding further strain. According to TipRanks data, NKE’s operating expenses are continuing to decline every quarter.

Operationally, Nike’s margins are under pressure. Gross margin in Q4 declined by 440 basis points to 40.3%, hurt by increased discounting and a shift back toward lower-margin wholesale channels. Meanwhile, digital sales—which once served as a key driver of growth—fell 14% in the same quarter.

While CEO John Donahoe’s successor, Heidi O’Neill, has laid out a promising turnaround strategy, it’s clear the road to recovery will take time. Macroeconomic headwinds, including inflation and weakening consumer demand, add further complexity. Simply put, Nike’s challenges are far from resolved.

A Valuation That’s Hard to Justify

In addition to these hurdles, Nike’s stock appears to be overvalued. Consensus estimates peg fiscal 2026 EPS at $1.68, giving a forward P/E of 42. Even looking to 2027, where analysts expect EPS of $2.47, the P/E for that year is 28 at current prices, still steep for a company facing growth challenges.

Note that the consumer discretionary sector’s median P/E is just 17, and there is no reason for Nike stock to trade at a premium, especially at its current state. With revenue declines expected to continue and tariffs looming, the stock’s valuation assumes a recovery that’s far from guaranteed. I think shares would be more fairly valued closer to $60 today.

Is Nike Stock a Buy, Hold, or Sell?

Currently, most analysts maintain a generally positive outlook on Nike stock. NKE holds a Moderate Buy consensus rating, based on 16 Buy and 13 Hold ratings issued over the past three months, with no analysts recommending a Sell.

NKE’s average 12-month price target stands at $76.38, suggesting a modest upside of ~4.5% from current levels. However, the relatively limited upside underscores Wall Street’s cautious stance, as ongoing risks continue to weigh on the stock’s long-term trajectory.

See more NKE analyst ratings

Profit Taking Consideration for NKE Investors

Nike’s Q4 results provided a much-needed lift for the stock, and the early steps under new CEO Elliott Hill suggest the beginnings of a possible turnaround. However, the path forward remains challenging. The company faces intensifying competition, continued weakness in the Chinese market, and looming tariff costs that could further pressure margins.

At its current elevated valuation, Nike appears priced for perfection in a market environment that’s anything but. Given these risks, selling into the recent rally and securing gains ahead of potential headwinds may be the more prudent course of action.