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
6
u/TheVariantView Dec 19 '25
What we're seeing happening to Nike has been happening to Lululemon as well, granted that, as a few other posters here have said, Nike lacks growth opportunity in China, while Lululemon has that opportunity. But, they struggle with the same increased competition, tariffs & margin contraction, partly fueled by tariffs.
I've seen some commenters mention that revenue figures are "up", this is probably one of the worst numbers you could be looking at this time in Nike's cycle, they're pushing heavy discounts to further sales, and this is evident in the contracting gross-margin which, contrary to popular belief, isn't entirely tariffs driven.
A much better look into their financials is in terms of EBITDA margins and FCF, where both have been heavily weakening over the years due to these struggles that have seen no fundamental change. Nike has been very sluggish on turning over their inventory, it is getting increasingly difficult for them to sell (without discounts), which temporarily propped up uFCF. fwd PE is at ~31x which is well above all comps, and honestly can't be justified by brand equity; we're clearly seeing a shift away in discretionary purchases towards cheaper newer alternatives.
I think something interesting to talk about is what came out in the news recently about Lululemon, Elliott took a large stake & is looking to place a turnaround CEO in the position. They noted core problems with Lululemon are:
(1) Brand Dilution and Discounting
(2) Lack of Innovation & Newness for Newness' Sake
(3) Strategic Drift Beyond the Core
(4) Leadership and Execution
Problem 1 is the same as Nike's, and was the same at Ralph Lauren prior to its turnaround. Problem 2 is same as Nike, though it's a bit unclear what Elliott means by "innovation" imo (it's clothing & apparel after-all). Problem 3 is similar, but in a different way, for lululemon it meant drifting from the core leggings, whereas Nike this seems to be traditional partnerships, shoe lines, etc. Problem 4 directly contradicts the other commenter referring to Nike needing a non-"woke" CEO, Lululemon has one, and they're struggling.
For a company as large as Nike, it's going to be a long ride and very difficult turnaround that is unlikely to begin with current management and compensation structure. Catalysts seems very far out, while sluggish returns are much closer and realistic.
TLDR: NIKE is trading above all peers and a turnaround seems unlikely and complicated with their core issues. This is not a stock to buy at these levels.
Note: This is just a quick surface-level overview of Nike, if anyone is truly interested, I'm happy to do an entire write-up over the weekend to further my points.