Nike Stock Has Collapsed - Is It Finally A Buy?
Summary
Daniel states that Nike, once a historically strong performer, is now facing significant challenges, with its stock down almost 80% from its 2021 peak. Recent financial reports indicate a struggling business: full-year revenues for fiscal year 2026 were down 2% on a constant currency basis, and Q4 revenue was down 4% year-over-year. Without a one-time tariff recovery, gross margins would have declined, and true earnings per share for the year were $1.60, a 25% year-over-year decrease. While some segments like running show promise with five consecutive quarters of double-digit growth and stabilizing margins, key areas like sportswear and Jordan streetwear, which account for half of Nike's revenue, are experiencing double-digit declines. Daniel also notes that some revenue decline is self-inflicted as Nike pulls back on certain products and digital promotions to improve margins and revenue quality.
However, a major concern for Daniel is the strong performance of Nike's competitors, suggesting Nike is losing market share. Competitors such as Adidas, Steve Madden, Deckers, On Holding, and Aritzia are all reporting significant revenue growth, while Nike has seen minimal growth (0.2%) since Q4 2021, placing it last among its peers in this metric. This trend indicates that Nike's struggles are company-specific rather than solely a macro issue.
Ultimately, Daniel views the entire fashion and retail industry as "uninvestable" for his long-term investment strategy. He cites the industry's unpredictability, rapid changes in consumer trends, fierce competition, and the eventual "wall" that even strong brands like Lululemon and Under Armour eventually hit. He argues that predicting future profits in this sector is highly speculative. For Nike specifically, Daniel sees it as a turnaround story with significant execution risk, noting that it still trades at approximately 24 times trailing 12-month earnings (excluding one-time tariff benefits). Even if Nike's EPS were to recover to its all-time high of $3.80, the stock would still be trading at about 10 times earnings today, but achieving this recovery requires substantial work and is not guaranteed. He explicitly states his decision not to invest in Nike or Lululemon due to these long-term uncertainties.
Mentioned Stocks
Reasoning: Nike is a turnaround story facing fierce competition and losing market share to faster-growing competitors. Its main lifestyle brands are struggling with double-digit revenue declines, and while the running segment shows some strength, the overall business is declining with uncertain future growth. Daniel considers the fashion industry uninvestable due to unpredictability, rapid trend changes, and fierce competition. He notes Nike trades at 24x TTM earnings (ex-tariffs) and, even at an all-time high EPS of $3.80, would still be 10x earnings, but getting there requires significant, uncertain turnaround efforts. He explicitly states he is not buying Nike.
Reasoning: Daniel highlights Lululemon as another example of a strong fashion brand now seeing sales decline after years of growth, reinforcing his view that the fashion industry is unpredictable and uninvestable for long-term investors. He explicitly states he is not buying Lululemon, seeing it as a turnaround business with an uncertain future.
Reasoning: Daniel highlights On Holding's exceptional growth (up 18.5% YoY and an impressive 344% total revenue growth since Q4 2021), positioning it as a strong competitor significantly outperforming Nike. This serves as evidence that Nike's struggles are company-specific and it is losing market share within the competitive landscape. No investment recommendation is made for On Holding.
Reasoning: Daniel mentions Adidas as a competitor that is growing (revenue up 6.3% YoY, 22.6% total revenue growth since Q4 2021) and seeing slight re-accelerations, contrasting with Nike's struggles. This is used to demonstrate Nike is losing market share and its issues are company-specific, not purely macro. There is no direct investment recommendation or action for Adidas itself.
Reasoning: Daniel points to Steve Madden as a competitor showing strong growth (up 18.2% YoY) and slight re-accelerations, contrasting with Nike's struggles. This supports his argument that Nike's problems are company-specific rather than solely macroeconomic, as other fashion brands are performing well. No investment recommendation is made for Steve Madden.
Reasoning: Daniel uses Deckers as an example of a competitor growing (up 7.9% YoY and 86% total revenue growth since Q4 2021) while Nike declines. This data reinforces his view that Nike is losing market share and its issues are internal, not just macro-driven, as other companies in the sector are thriving. No specific investment advice is given for Deckers.
Reasoning: Daniel praises Aritzia for its outstanding growth (up 37.5% YoY and 202.8% total revenue growth since Q4 2021), calling it an "outlier" in the industry. He uses Aritzia's success to further prove that not all fashion brands are struggling due to macro issues, emphasizing that Nike's underperformance is largely company-specific. Despite its strong performance, Daniel still considers the fashion industry uninvestable for himself, and makes no direct investment recommendation for Aritzia.
Reasoning: Daniel references Under Armour as a case study to illustrate the inherent unpredictability and eventual decline that even successful fashion brands face. He notes that after years of growth, Under Armour's sales stalled and are now declining, reinforcing his argument that the fashion and retail industries are "uninvestable" for long-term investors due to their volatile nature.