“Just Do It,” goes the motto that Nike (NYSE:NKE) made a household catchphrase. With its branded “Swoosh” and world-famous spokespeople, it is no stretch to argue that Nike helped to build the premium shoe market — one that grew by leaps and bounds earlier this decade.
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Indeed, the COVID years saw a major spike in Nike’s footwear sales – from $23.3 billion in 2020 to over $35 billion in 2023 – though growth has been slowing of late. Last year saw footwear revenues decrease slightly, and its share price has fallen almost 40% during the past twelve months.
This week, Nike will be releasing its FQ4 2025 results, and consensus estimates are not exactly bullish. Analysts are expecting total revenues of $10.7 billion – down 15% year-over-year – while a projected EPS of $0.12 would represent an 89% decrease year-over-year.
One top investor known by the pseudonym Stone Fox Capital thinks that the growing competition will continue to present stiff resistance going forward.
“Nike remains overvalued despite a significant price decline, with the market underestimating downside risks and ongoing competitive pressures,” explains the 5-star investor, who is among the top 3% of TipRanks’ stock pros.
The biggest challenge for Nike going forward will be the growing competition, asserts Stone Fox Capital, citing On Holding and HOKA as two of the biggest threats. For instance, ONON’s On Running is expected to grow revenues by 40% this year.
Still, NKE is trading “at multiples above the market,” despite forecasts of stagnating growth going forward. Stone Fox Capital spots quite a disconnect – one that the market has yet to take fully into account.
“Nike should be viewed based on the readily available data of a massive athletic footwear company that hasn’t grown in years facing immense competition,” adds Stone Fox Capital.
Stone Fox Capital is urging investors to pay attention to upcoming guidance for the next quarter, which the investor predicts will be a “horrible” forecast. Needless to say, Stone Fox Capital does not believe that “Just Do It” is good advice for would-be investors at present.
“The stock might be down substantially from the all-time highs a few years ago, but Nike isn’t actually trading like the business is under pressure,” concludes Stone Fox Capital, who rates NKE a Sell. (To watch Stone Fox Capital’s track record, click here)
Wall Street is overall positive when it comes to Nike, though not overwhelmingly. With 12 Buy and 11 Hold ratings, NKE is a consensus Moderate Buy. Its 12-month average price target of $71.24 has an upside of ~19%. (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.