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Is Now a Good Time to Buy Nike Stock?

The Motley Fool · 13h ago

Key Points

  • Nike is making progress with its turnaround plan, but it's still expecting sales to decline this year.

  • The situation for the brand is dire in China, where it's sales sank by 25% year over year in its most recently reported quarter.

  • Nike stock is not trading at a deep value level now.

Nike (NYSE: NKE) may still be the king of sneakers and athletic wear, but its business has taken a major hit over the past few years, and its stock price reflects that; it's down by 77% from its peak.

But things might be changing. There's a new CFO, the company is making some strong progress, and Nike stock is up 19% over the past month.

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Is now the time to buy?

Nike stock started to climb after its latest earnings report was released on Oct. 1.

Revenue was still declining in its fiscal 2027 first quarter, which ended Aug. 31. It fell 4% year over year, and it's expected to decline for the full year. However, the company's disciplined cost management is showing, and gross margin improved 0.6 percentage points from the prior-year period to 42.8%.

Nike sneakers.

Image source: Nike.

Management's strategy has many components, starting with faster innovation in its sports business, and it's also deliberately cutting the volume and frequency of Jordan Retro launches to restore the brand's scarcity.

Nike's major problem right now is its China business -- sales there dropped 25% year over year. However, CEO Elliott Hill confirmed that the company believes that it has identified what needs to be done and is in the process of cutting ties with third parties in that market that it believes have harmed its brand.

The market seems to think that Nike stock is oversold, and it had been trading at a P/E ratio as low as 16 before it started to climb back up. It now trades at a P/E of 19, which isn't super cheap for a company with declining sales. Management is guiding for fiscal 2027's earnings per share to land in the range of $1.15 to $1.35, well below fiscal 2026's $2.09. Still, Nike is the player to beat in its industry.

I think it's still a bit early to feel confident about Nike's turnaround, and there's no rush to buy the stock right now.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.