Is Nike a Buy After Its Q4 Earnings Beat?

Nike (NYSE: NKE) recently released its latest earnings numbers, which beat expectations and left analysts and investors thrilled. The stock popped on the news, as many investors may see the better-than-expected results as an early indication that the business in going in the right direction under its new CEO, Elliott Hill.

The stock has hit levels it hasn't been at in months. Could now be a good time to buy the stock as it starts to rally, or is Nike still too risky of an investment to be hanging on to?

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Nike delivered an earnings beat, but its sales were down across the board

On June 26, Nike posted its fourth-quarter and year-end results for fiscal 2025, which ended May 31. For the most recent quarter, the company's sales totaled $11.1 billion and beat analyst expectations of $10.7 billion. And its per-share profit of $0.14 also came in slightly ahead of Wall Street projections of $0.13.

The top- and bottom-line beat gave investors reason to be optimistic that perhaps things are going better than expected.

Hill says that "from here, we expect our business results to improve." He took over in October of last year, following the retirement of John Donahoe. Hill hopes to turn around the struggling footwear and apparel company by reconnecting with its key retail partners.

But while the recent earnings beat may be encouraging to hear, investors shouldn't overlook the fact that sales were still down 12% year over year. And across every major market, its sales were down for the quarter. The company's net income also cratered by a whopping 86%, as sales were down, margins were compressed, and the business spent more on marketing.

While the earnings beat may sound good, there are still plenty of issues here that should give investors pause about the business.

Tariffs still pose a big risk for the business

Management also has to worry about another headwind: tariffs. The company expects that tariffs will cost the business approximately $1 billion during the current fiscal year. And while the company is looking to make adjustments to its supply chain and increase prices to "fully mitigate" the effects of tariffs, it underscores just how vulnerable the business is to global trade policies.

Raising prices may work to strengthen its margins, but it may end up hurting demand in the process. And there's also the risk that tariff rates may change. Economic conditions may also worsen across the globe due to trade wars, further impacting the sale of discretionary items, such as Nike's high-end footwear.

Investors should be careful not to celebrate too early, because there are still plenty of question marks around the business and how strong its financials may look in the year ahead.

Should you buy Nike stock?

Beating quarterly analyst expectations is a short-term metric for a stock. How the business performs over a longer stretch and how sound its fundamentals look will ultimately dictate where the stock will go in the long run. Unfortunately, it's simply far too early, with too little progress made in Nike's turnaround efforts thus far, to suggest it's definitively on the right track and is a safe stock to buy.

There's still ample risk here, and paying more than 30 times earnings for a stock that's seeing its revenue plummet doesn't make for a compelling investment opportunity. Investors may be better off taking a wait-and-see approach with Nike's stock, as there could still be tougher times ahead for the business in the months ahead.

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David Jagielski 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.