Is the Problem With Nike's Stock That It Has Too Much Exposure to China?

Nike (NYSE: NKE) has a growth problem. The business just isn't doing as well as it has been in years past, and these days, investors are looking elsewhere in search of top growth stocks to own. Over the past five years, the returns from Nike stock have been abysmal, as it has crashed close to 70% during that stretch. Normally, a buy-and-hold strategy, especially when it involves an iconic company with a terrific track record, yields strong returns for investors. That hasn't been the case with Nike at all.

Under CEO Elliott Hill, the company is attempting to turn things around. While there have been some small wins and signs of progress, the business is still trying to prove to investors that it's worth investing in -- its stock recently hit a new 52-week low.

There is one market that has been doing particularly poorly for Nike, and that's China. Is its dependence on that part of the world the biggest problem for the shoe stock right now, and if so, what does that mean for investors?

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Sales have been underwhelming in China

Nike's sales were flat in its most recent quarter, which ended on Feb. 28. But a closer look at the results shows investors that the performance wasn't nearly the same across all of its geographical areas. The company did the best on its home turf, with North American sales rising by 3%.

The most challenging market has been in China, with Nike reporting that revenue in Greater China was down 7% year over year, and that falls to 10% when excluding the impact of foreign exchange. Even in the Asia Pacific & Latin America segment, things weren't that bad, with its organic growth rate being a negative 2%.

The Greater China segment is an important one for Nike, as it represents about 14% of its revenue. Plus, the company has many factories in China. At a time when U.S.-China relations aren't the greatest, the exposure that the company has to that part of the world could be particularly troubling for the stock.

Is Nike's stock too cheap to pass up?

Nike's stock hasn't been this cheap in over a decade, and investors may be willing to look past the challenges the company faces in China and other parts of the world, simply because its valuation is so low. Buying at a severely discounted price can, after all, provide you with some great margin of safety.

Unfortunately, there hasn't been much safety at all with the stock. It came into 2026 trading at a significantly reduced valuation, and it has continued to fall even further, down another 30% this year. This could make for an intriguing contrarian investment (if you're willing to take on the risk), but you'll need to be patient, as the turnaround will take time and there are no guarantees it'll be a success.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.