Brad Thomas
Founder & Lead Analyst of Wide Moat Research
Nike may turn, but On and Hoka appear to be widening their moats, and cleaner economics with more durable advantages are preferable. Nike's FAST Graphs chart is one of the ugliest in a while, raising the question of how much of its moat remains. Possible catalysts are product innovation, a wholesale recovery, China stabilization and cost savings. On is taking market share, and street observation in New York showed On and Hoka standing out on people's feet. x.com x.com x.com
Nike is getting interesting at 18.7x earnings with a 4.4% dividend yield, but the wholesale reset and inventory cleanup still need proof, so the margin of safety comes at 15x, last seen during the global financial crisis. The brand is not broken. The 18.7x also flatters: an expected $986 million IEEPA tariff recovery inflated fiscal Q4-26 gross margin by about 900 bps and EPS by $0.52, so that 15x should use normalized forward earnings after sustainable tariff costs. x.com x.com
Nike's decline comes from products that lost their edge while competitors caught up. It focused on campaigns, and nobody remembers the last Nike shoe that mattered; On and Hoka filled the gap, and On signing Mbappé shows who is gaining. Sales are flat, earnings are shrinking, and China sales fell 26%. At $33 the stock is cheap versus history, but the turnaround needs proof first. x.com x.com x.com x.com x.com x.com x.com
Nike, like other apparel makers, is uninvestable because a durable moat is near impossible in this business. Consumer preferences keep changing, requiring constant new marketing to keep people excited, and making a physical product leaves an inherently low-margin business with little long-term pricing power. A major turnaround is possible, but the business model gives no confidence in its long-term strength. x.com
Nike's brand concerns look priced in; stabilization, not sudden revenue acceleration, is what the speculative long needs. A few good campaigns and a return to large stores could help, though China consumers will be a drag. Short-term EPS is a poor indicator, and customers may return after trying other brands. x.com x.com
On Holding is the better opportunity right now, supported by its recent earnings guidance. x.com
Nike just can't compete the way it used to: it no longer captures the market it once did, and that clearly isn't changing any time soon. The post-earnings reaction went as expected, with the stock already at its lowest since 2014 going in. x.com x.com
Nike's push to reposition as a premium sports brand looks like the right route to recovery, including in Greater China. New CFO Dave Denton was clearer, and Alex Arnault's board seat, Jordan's return to scarcity, elite athlete deals and less discounting support it. EPS was fairly strong and margins are improving; guidance looks set deliberately low to beat, since management says the decline largely stems from its own choices. The dividend is safe; a full turnaround may take 3-5 years. x.com … Show more
Nike's turnaround is looking much longer than bulls expected, and about 17x forward earnings is not cheap for a business growing low single digits. China sales fell 26% FX-neutral while Adidas' Greater China sales grew 15%, pointing to a Nike problem, not a China problem. Sportswear fell low double digits with Dunk revenue down about 50%, Jordan fell mid-teens, and most PACE savings are expected only in FY29-30; Performance grew high single digits. The must-buy price is $25. x.com x.com x.com
Nike keeps getting its lunch eaten by competitors, with no clear way to turn the ship around. It now expects fiscal 2027 revenue to decline by high single digits, per @negligible_cap. Caitlin Clark isn't the savior, and the stock isn't worth touching. x.com x.com
Nike's valuation pays investors to wait for a turnaround that will take longer than expected. It trades at just 16x earnings, near its lowest valuation ever, with a roughly 5% dividend yield, and would need a 127% rally to regain its 200-week moving average. Revenue is projected to fall another 4% in FY2027, but the business will grow again; the market prices it as if it were disappearing. Unlike Novo Nordisk, Nike faces no patent cliff. x.com x.com
Nike is a rebound dog with years of overhead resistance and disgruntled holders, so buying more of the clear market leaders makes more sense. It may come back at some point, but per IBD, leaders tend to keep winning on structural advantages while investor psychology is warped toward beaten-down laggards that look cheap. x.com x.com
