James Brumley, The Motley Fool
7 min read
In This Article:
-
Nike has struggled with several different headwinds of late, with many of them appearing well before tariff risks.
-
Slowing sales may be an indication of bigger challenges that won’t be easy to overcome.
-
Although the company can turn its business around, there may not be enough upside potential here to expect significant gains from Nike stock.
The broad market has worked its way out of the bear market it stumbled into earlier this year. But not every name has followed suit. Shares of Nike (NYSE: NKE) continue to drift lower, down 66% from their 2021 peak and still making new 52-week lows.
As veteran investors can attest, however, the time to step into a good stock is after it's been beaten down, and before a recovery move takes hold.
And this premise raises an important question for Nike: Is this a good stock of a company with a bright future that's simply passing through some temporary turbulence? Or is the stock's recent performance a fair indictment of the company's recent past, present, and plausible future? If it's the former, dive in. If it's the latter, though, steer clear.
Here's some perspective on the matter.
Nike is a major name within the athletic apparel arena and the market-leading name in athletic footwear. It did over $50 billion in business last fiscal year, selling directly to consumers via its website as well as its own stores, as well as third-party retail partners. Of that revenue, nearly $6 billion was turned into net income.
Although its biggest market is North America, it accounts for only about 30% of its total sales. Consumers all over the world love its products. The brand consultancy Interbrand ranks Nike as the world's 14th best brand of 2024, underscoring the power of its name and universally recognized "swoosh" logo.
The name alone is a powerful tool for management to work with, even if the company is going through a short-term rough patch. If the brand is old enough and loved enough to have woven itself into the fabric of the global culture (which it has), and its reach is long and wide enough to keep competitors in check (which it is), it's a recipe for success. That's how Nike has done as well as it has for as long as it has, rewarding shareholders for most of the stock's 45 years on the market.
The company's best days, however, are arguably in the past. Ditto for its millionaire-making potential.
Nike isn't doomed. Someone can do something great with this incredible brand name.
