While it can be tempting to buy a hot stock when it’s soaring in value, the returns may not be all that great if the stock is already trading at a high. If, however, you’re willing to take a chance on a beaten-down stock, then the payoff could be much more attractive in the long run.
Nike (NKE -3.23%) could be that type of stock right now. It’s in the early stages of a turnaround, and it may take years before its financials improve. It’ll require patience from investors, but it’s an option worth considering, especially at a time when the broad market looks inflated and many stocks are trading at high valuations.
Could now be an opportune time to load up on Nike stock?
Nike stock is trading near multiyear lows
To say things haven’t been going well for Nike would be a massive understatement. It has been a top athletic and footwear brand for decades, but over the past three years, its market cap has fallen over 50%. A slowing growth rate and uninspiring economic conditions have weighed on the consumer goods stock so much that it’s not only trading near a 52-week low, but it’s also getting closer to the levels it fell to in early 2020, during the COVID-19 crash.
As a result of the its extended decline, the stock is currently valued at 23 times its trailing earnings, which is near its lowest level in the past decade.
Data by YCharts.
Can the business get back to growth?
Nike stock looks cheap, but any upside potential hinges on its outlook. If the business continues to struggle with growth and profits, the stock likely has further to fall.
And that’s the big test for new CEO Elliott Hill, who took over in Oct. 2024. With more than 30 years of experience at Nike, Hill came out of retirement to take over the role from John Donahoe.
Data by YCharts.
Nike experienced a surge in revenue during the pandemic, but that is far from the situation today. The company has had to grapple with supply chain disruptions and poor inventory management. An overly aggressive focus on the direct-to-consumer business resulted in growing pains as well.
Revenue has declined in the three most recent quarters, which is why a turnaround may not be quick or easy for the new leadership. But Hill is looking to rebuild Nike’s relationships with its wholesale partners, who have historically been a key part of the company’s success.
If you believe in the brand, you should believe in the stock
Not all of the company’s problems have stemmed from operational missteps. Consumers have been scaling back on discretionary purchases due to inflation and challenging economic conditions too.
That said, this is still the top brand in athletics and footwear, and Nike has seen its fair share of market cycles. It might take a while before new leadership can build momentum with its turnaround, but buying and holding Nike stock at its current price should feel like a steal in a few years.
Nike Stock: A Steal of a Deal or Overpriced?
Nike, the iconic sportswear brand, has been a staple in the investment world for years. With its strong brand recognition, innovative products, and global reach, Nike has been a favorite among investors looking for long-term growth potential. However, recent fluctuations in the stock market have left many wondering: is Nike stock a steal of a deal, or is it overpriced?
On one hand, Nike has shown consistent growth in revenue and earnings over the years. The company’s strong presence in the athletic apparel market, coupled with its successful marketing campaigns and partnerships with top athletes, has helped drive its stock price higher. Additionally, Nike’s focus on digital sales and e-commerce has positioned the company well for future growth in a rapidly evolving retail landscape.
On the other hand, some investors argue that Nike’s stock price may be inflated. With a price-to-earnings ratio higher than the industry average and concerns about potential supply chain disruptions, some believe that Nike’s stock may not be as undervalued as it appears. Additionally, competition from other athletic apparel brands and changing consumer preferences could impact Nike’s market share and profitability in the long run.
So, is Nike stock a steal of a deal, or is it overpriced? The answer may depend on your investment strategy and risk tolerance. While Nike’s strong brand and growth potential make it an attractive option for many investors, it’s important to carefully evaluate the company’s financials, industry trends, and competitive landscape before making any investment decisions. As always, it’s best to consult with a financial advisor or do thorough research before buying or selling any stocks.
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