Nike Just Hit a 12-Year Low. Does History Say Now Is the Time to Buy?

Nike (NYSE: NKE), the world's largest athletic footwear and apparel maker, was once considered a stable blue chip stock. But over the past five years, its stock has plunged more than 75%. It's now trading at its lowest price in 12 years.

Could Nike be a contrarian play at these levels? Let's see why its stock plummeted, if it's historically undervalued, and if it has a shot at a comeback over the next few years.

Image source: Getty Images.

What happened to Nike?

More than a decade ago, Nike declared it could grow its revenue from $30.6 billion in fiscal 2015 (which ended in May 2015) to $50 billion in fiscal 2020. But in reality, Nike's revenue only reached $37.4 billion in fiscal 2020. Its sluggish sales in North America and Europe, soft demand for its Converse brand, and the COVID-19 pandemic all caused it to miss that target.

After the pandemic passed, Nike stabilized its business by expanding Nike Direct (its first-party e-commerce marketplace and brick-and-mortar stores) to reduce its dependence on wholesale retailers. From fiscal 2020 to fiscal 2023, its revenue grew at a steady 11% CAGR.

But after that recovery, Nike's top-line growth flatlined in fiscal 2024, and its revenue fell 10% in fiscal 2025. That slowdown was caused by its declining sales in North America and a strong dollar, which offset its steadier growth in China and other overseas markets. Nike Direct's expansion backfired as shoppers returned to wholesale retailers, and aggressive competitors -- including Deckers' Hoka, New Balance, and On Holding -- carved up the performance-running and lifestyle sneaker markets.

That pressure forced Nike to rely on markdowns to grow its revenue. From fiscal 2023 to fiscal 2025, its gross margin declined from 43.5% to 42.7%, and its EPS fell from $3.23 to $2.16.

In fiscal 2026, Nike's revenue came in flat again. Its North American business finally grew, but its overseas sales -- especially in China -- fizzled out. Its EPS dipped 3% to $2.10. Its gross margin expanded 20 basis points to 42.9% for the year, but that was mainly due to a one-time tariff recovery rather than a significant reduction in markdowns.

Can Nike stabilize its business?

Nike's turnaround strategy has been messy. It's trying to rebuild relationships with the wholesale retailers it alienated during Nike Direct's expansion, reduce its excess inventory without cheapening its brand, and develop new performance-oriented brands to widen its moat and reduce its dependence on its aging retro flagship shoes (Air Force 1, Dunk, and Air Jordan Retros). It also needs to find fresh ways to pull consumers back from rapidly growing local challengers like Anta and Li-Ning in China.

CEO Elliot Hill, who took the helm in Oct. 2024, doesn't expect the "Win Now" transformation plan to boost its revenue anytime soon. Instead, Hill is calling fiscal 2027 a "reset year" in which it will sacrifice its top-line growth to clear out its inventory and stabilize its margins.

Will Nike's stock sink even lower?

For the first half of fiscal 2027, Nike expects its revenue to decline by the low- to mid-single digits, with a steeper decline in the second quarter. It expects heavy overseas digital promotions, the adjusted timing of its North American wholesale shipments, and tough macro headwinds on discretionary consumer spending to cause that slowdown.

It's also bracing for slower sales in China through fiscal 2027 as it clears out its inventories, reduces sell-in levels, and transitions toward digital storefronts on third-party marketplaces. That decline should be partly offset by its growth in North America. Analysts expect its revenue to decline nearly 2% for the full year.

On the bright side, Nike expects its gross margins to start expanding in the first quarter of fiscal 2027 as its logistics and supply chain costs decline. But analysts still expect its EPS to drop 18% for the full year.

At $40, Nike still isn't undervalued at 23 times this year's earnings. Its forward dividend yield of 4.1% might seem attractive, but it's lower than the 10-Year Treasury's 4.7% yield. So while Nike's stock price might seem historically cheap, it could get even cheaper if it doesn't address its existential challenges. That's why I'd avoid it until a few more green shoots appear.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deckers Outdoor, Nike, and On Holding. The Motley Fool has a disclosure policy.