NIKE Stock Falls 11% in 3 Months: A Buy Opportunity or Value Trap?

NIKE Inc. NKE stock has been in deep trouble in recent months from a mix of channel disruption, margin pressure and uneven regional recovery. The company’s push to reset its digital business by pulling back on heavy promotions has slowed traffic and near-term sales momentum, even as it works to rebuild full-price demand.The company’s profitability is under strain from higher input costs, heavier wholesale discounting and tariff-related cost burdens. Greater China remains a major operational headwind, with weak store traffic, sluggish sell-through and a highly promotional digital marketplace weighing on revenue quality and margins. Meanwhile, classic footwear franchises are still in the reset mode, further dragging down the overall performance.These trends have caused the company’s shares to decline as much as 11.1% in the past three months, slightly better than the Shoes and Retail Apparel industry’s fall of 12.1%. However, the stock has underperformed the broader sector’s 7.2% dip and the S&P 500 index’s 6.9% growth in the same period.NIKE's performance is notably weaker than its competitor lululemon athletica inc. LULU and Steven Madden SHOO, which have rallied 8.7% and 45.5%, respectively, in the past three months. NKE has also lagged adidas AG’s ADDYY slip of 9.5% in the same period.NIKE’s 3-Month Price Performance Image Source: Zacks Investment Research After shedding 11% of its value in just three months, NIKE now stands at the crossroads for investors hunting either a rebound or bracing for further downside.At the current share price of $65.65, NKE trades 25.6% above its 52-week low mark of $52.28. Meanwhile, the NKE stock’s price stands 20.4% below its 52-week high of $82.44. NIKE trades below its 50 and 200-day moving averages, indicating a bearish sentiment.NKE Stock Trades Below 50-Day & 200-Day Moving Averages Image Source: Zacks Investment Research Bleak Outlook Stirs Investor ConcernsNIKE’s near-term outlook remains challenging, intensifying investor unease about the pace and durability of its recovery. Management expects continued revenue pressure as the company deliberately reins in promotions to restore full-price integrity in NIKE Direct, a move that is weighing heavily on digital traffic and near-term sales momentum. Management projects second-quarter fiscal 2026 revenues to decline in the low-single digit. This includes a one-point gain from foreign exchange.Greater China continues to be the weakest link, with poor store traffic, sluggish sell-through and a deeply promotional digital environment keeping both revenue growth and profitability under strain. At the same time, classic footwear franchises and Converse remain in reset mode, delaying a broad-based turnaround. While wholesale momentum and running-category strength offer early positives, management has cautioned that progress will be uneven and that multiple parts of the portfolio will remain under pressure for some time.Margin recovery also looks elusive as the company faces persistent wholesale discounting, elevated product costs and a sharply rising tariff burden that is now a meaningful structural headwind. Management estimates the new tariff regime to remain a material headwind through fiscal 2026, limiting near-term margin recovery. For second-quarter fiscal 2026, the company expects the gross margin to decline 300-375 bps, comprising a 175-bps negative impact of the new incremental tariffs. Management forecasts SG&A dollars to increase in the high-single digit, led by higher demand creation investments and a low-single-digit rise in operating overhead. The company predicts other expenses, net of interest income, to be $10-$20 million for the fiscal second quarter.NIKE’s Estimate Revision TrendThe Zacks Consensus Estimate for NKE’s fiscal 2026 earnings per share has shown a downtrend, declining by a penny, in the past 30 days. The consensus mark for fiscal 2027 moved up 2% in the last 30 days.For fiscal 2026, the Zacks Consensus Estimate for NKE’s sales and EPS implies 2.4% and 24.1% year-over-year declines, respectively. The consensus mark for fiscal 2027 sales and earnings indicates 5% and 54.2% year-over-year growth, respectively. Image Source: Zacks Investment Research Is NIKE’s Fundamental Strength Still Worth Noting?Despite near-term pressures, NIKE’s fundamental strengths remain visible beneath the ongoing reset. Management highlighted clear momentum in performance categories, particularly running, where innovation-led product refreshes are driving strong consumer response. Wholesale is also showing early signs of recovery as partners rebuild trust and lean into new assortments tied to sport-led demand creation. The company’s strategic “Sport Offense” reorganization is designed to sharpen product focus, accelerate innovation and strengthen brand storytelling across key sports such as football, basketball and training.Operationally, NIKE has made progress in cleaning up inventory and repositioning its digital business toward higher full-price selling, reinforcing long-term brand health over short-term volume. While Greater China, sportswear and Converse remain challenged, leadership emphasized that not all regions and segments will recover on the same timeline. As the product pipeline strengthens and demand creation investments take hold, NIKE’s structural advantages may drive a durable rebound once market conditions stabilize.Taken together, NIKE’s innovation engine, brand power and marketplace recalibration suggest that its long-term fundamentals will remain intact despite the current turbulence.NIKE’s Valuation PictureWhile NIKE remains fundamentally strong, backed by its decisive actions to reposition itself for sustainable and profitable long-term growth, its current forward 12-month price-to-earnings (P/E) multiple of 31.33X raises concerns about whether the stock's valuation is justified. This multiple is higher than the Zacks Shoes and Retail Apparel industry average of 27.13X and the S&P 500’s average of 23.44X, making the stock appear relatively expensive.At 31.33X P/E, the Swoosh brand owner is trading at a much higher valuation than its competitors. Its peers, such as lululemon, Steven Madden and adidas, are delivering solid growth and trade at more reasonable multiples. lululemon, Steven Madden and adidas have forward 12-month P/E ratios of 14.05X, 21.11X and 15.98X — all significantly lower than NIKE. At such levels, NKE’s valuation seems out of step with its growth trajectory, especially given the recent decline in its stock price. Image Source: Zacks Investment Research The stock's elevated valuation reflects high investor expectations for growth. However, NIKE looks increasingly vulnerable in an environment wherein market participants are growing cautious about overpriced Consumer Discretionary stocks. The company’s ability to meet or exceed these lofty expectations is crucial in justifying its premium pricing.ConclusionNIKE’s recent stock decline and downward estimate revisions clearly reflect the market’s negative sentiment toward its near-term outlook. Persistent margin pressure, tariff-related costs, digital traffic challenges and a slower recovery in key regions like Greater China continue to cloud near-term visibility. These factors justify the cautious stance investors have adopted in recent months.However, beneath the surface, NIKE’s long-term fundamentals remain intact. Strength in performance categories, wholesale stabilization, disciplined inventory management and its sport-led brand reset position the company for a healthier growth phase once near-term disruptions fade. While its premium P/E valuation suggests that expectations for recovery remain elevated, it also signals investor confidence in the brand’s long-term earnings power.While NIKE’s long-term growth story remains intact, near-term headwinds are likely to keep the stock under pressure. A neutral stance appears prudent for now, as investors may prefer to wait for clearer evidence of fundamental stabilization and improved earnings visibility before turning more constructive. The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NIKE, Inc. (NKE): Free Stock Analysis Report lululemon athletica inc. (LULU): Free Stock Analysis Report Adidas AG (ADDYY): Free Stock Analysis Report Steven Madden, Ltd. (SHOO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks