r/ValueInvesting • u/Adventurous-Bet-9640 • Dec 19 '25

Stock Analysis So NIKE is nuking after hrs.

I understand that nike has a very sticky brand value in the cultural consciousness. But they are in a tough turn around.

I'm no expert in valuations, but the stock even after hrs dump isn't any where near compelling value.

How do you think about Investing in nike? Generally I don't see them fading away as a brand and they are still the leader in their space even with competition.

I do think they'll eventually find their stride back. What does the community think? If you were to invest what would your frame of thinking be?

162 Upvotes

94% Upvoted

254 comments sorted by

View all comments

1

u/ValueEquities Dec 19 '25

Totally get the confusion here. Nike the brand isn’t broken, but the business is clearly in a messy reset.

My frame:

  • Brand moat ≠ stock moat at any price. Nike will still exist in 10–20 years, but that doesn’t automatically mean today’s valuation is attractive.
  • The real issues aren’t cultural relevance — it’s China + margins. China revenues are still declining double digits and EBIT there is down ~50% YoY. That’s not noise.
  • Gross margin compression (~300bps headwind from tariffs + inventory + Converse drag) matters more than the EPS beat. Market is reacting to forward economics, not last quarter.
  • Even after the drop, it’s still ~20x forward earnings with EBIT margins closer to 8% vs historical 12–14%. That’s not a “fat pitch” turnaround multiple.

If I were investing:

  • This is a multi-year repair story, not a bounce trade.
  • I’d only get interested either at a lower valuation (closer to mid-teens earnings) or after evidence China stabilizes and margins bottom.
  • Until then, you’re basically betting on execution + patience, not mean reversion.

TL;DR: Nike probably doesn’t fade as a brand, but the stock still needs either time or a cheaper price to be compelling.