Nike Stock's Terrible Performance Just Keeps Getting Worse. Is It Finally Time to Buy?

Nike (NYSE: NKE) stock keeps finding new lows. After falling 16% in April alone, shares have continued to drift lower in the weeks since. As of this writing, Nike trades at about $42 -- a 12-year low and roughly 34% below its 2026 start.

The sportswear giant's troubles are well-documented at this point. Greater China revenue continues to slip. Tariffs are squeezing North American margins. And late last month, management said it was cutting about 1,400 jobs, most in the technology group, as part of CEO Elliott Hill's "Win Now" turnaround effort. And the company's most recent guidance pushed the timeline for a return to growth even further out.

Still, this is Nike. The brand is global, likely here to stay for generations. Additionally, the balance sheet has plenty of cushion, and the dividend yield is now closing in on 4%.

So, is the worst finally priced in?

Image source: The Motley Fool.

A turnaround that requires patience

In Nike's fiscal third quarter of 2026 (the period ended Feb. 28, 2026), reported revenue was flat year over year at $11.3 billion. That's progress of a sort -- fiscal 2025 saw a 10% revenue decline -- but the profit picture is still ugly. Earnings per share fell 35% to $0.35, and net income dropped to $520 million from $794 million a year earlier.

And Nike's gross margin is similarly disappointing. It contracted 130 basis points to 40.2%, with higher tariffs in North America accounting for 300 basis points of pressure on their own. And it marked the sixth straight quarter of year-over-year gross margin declines.

There were some bright spots, however. Nike Running revenue jumped more than 20%. North America revenue grew 3%, with wholesale up 11% in that region.

But management's outlook didn't help. Nike said it expects fiscal fourth-quarter revenue to decline 2% to 4%, with Greater China revenue falling approximately 20% as the company accelerates inventory cleanup in that market. Chief financial officer Matt Friend also said the first quarter of fiscal 2027 should be the last quarter where higher tariffs are a material headwind to gross margins -- meaning gross margin expansion is not expected to begin until the fiscal second quarter of 2027, which ends around November of this year.

Friend himself acknowledged on the call that "our comeback is taking longer than we would like."

The dividend factor

For income-focused investors, there is at least one consolation. As the stock has slid, the dividend yield has climbed. At current prices, Nike's dividend yields nearly 3.9% -- well above where it sat at the start of the year.

And the dividend itself looks durable. Nike has raised its dividend for 24 consecutive years, leaving it one year shy of Dividend Aristocrat® status.

In the most recent quarter, the company returned about $609 million to shareholders through dividend payments, up 3% from the year-ago period. And the balance remains robust: $8.1 billion in cash and short-term investments at quarter-end, even after a $2.3 billion drawdown that reflected dividends, debt repayment, capital spending, and share repurchases.

But the risks remain elevated. Fashion, of course, is fickle and unpredictable. And Nike's weakness in China -- a key market -- is particularly concerning, especially as rivals like Lululemon and On Holding continue to post strong growth in the region.

So is Nike stock a buy? For those who value dividend income, I think it's finally cheap enough. But for those that don't, I'd pass, given that there's still no clear path back to consistent, meaningful sales growth.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc., Nike, and On Holding. The Motley Fool has a disclosure policy.