Nike Inc. has lost 55% of its market cap in the last three years. From a lack of quality to leadership to a lack of innovation and product strategy, several factors have contributed to the downfall. However, we believe the stock is in the process of bottoming out during the next year.
Nike, Inc., a multinational corporation based in the United States, designs, manufactures, and markets athletic footwear, apparel, equipment, and accessories. Incepted as Blue Ribbon Sports by Phil Knight and Bill Bowerman in 1964, it was rebranded as Nike, Inc. in 1971, deriving its name from the Greek goddess of victory.
A smiling person in sports gear testing out a piece of new fitness equipment.
The brand gains a competitive edge through its innovative strategies in the segments of product development and marketing, highlighting performance-driven technology and distinctive brand identity stemming from notable endorsements and iconic campaigns like the iconic “Just Do It.”
Nike’s leading products and services include athletic footwear; crafting shoes for a selection of sports and activities, sports apparel; clothes incorporating both performance and style, and equipment and accessories, particularly sports balls, bags, socks, protective gear, and digital devices.
The main revenue streams are the proceeds from direct sales through company-owned outlets, e-commerce platforms, and partnerships with retailers all around the globe. Diversifying its product offerings, Nike also markets under subsidiaries like Jordan and Converse.
The athletic giant targets youth, professional athletes, fitness enthusiasts, students, sports teams and organizations, and fashion-conscious consumers. The end market comprises a wide segment array, namely retail consumers, professional athletes, and teams and organizations. Nike maintains a robust brand presence across the Americas, Europe, Asia-Pacific, the Middle East, and Africa, catering to a range of markets by offering tailored products.
The company has been found lacking in the product innovation department for quite a few quarters now. So much so that the company has announced to reevaluate its product strategy. We have already seen a few changes recently, with the new Pegasus 41 technology coming out in July and the new Air Max Dn launched in March this year.
Sales have been going down as a result of the lack of innovation. The company’s business went down 7% in the wholesale department and 12% in the direct sales department. While China’s weakness is partly to blame for the decline, the management hasn’t been proactive enough to arrest the decline in sales.
Having said that, the company expects a return to growth in 2026. 2025 will be a transitional year for the company, which means not many investors will be inclined to buy the stocks for short-term gains. This downward pressure on the stock will give ample time to buy healthy quantities in the stock. If the management restructuring and product strategy changes work, 2026 could bring some hefty rewards for investors!
Nike is not on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 66 hedge fund portfolios held NKE at the end of the second quarter which was 71 in the previous quarter. While we acknowledge the potential of NKE as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
