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Nike (NYSE:NKE) has been one of the most disappointing S&P 500 stocks in recent years. Since late 2021, it has bombed 65%, while the index has risen by more than 50%.
Yet one person thinks the selling in Nike has gone too far. That’s Apple CEO Tim Cook, who is also an independent director on the sportswear giant’s board.
Regulatory filings show that he bought 50,000 shares, which works out at a cost of just under $3m. It’s rare for Cook to buy Nike stock on the open market, so this is a clear vote of confidence in the company’s turnaround efforts.
With Nike still down 18% this year, should I also buy shares?
Why are investors bearish on the stock?
Nike is facing probably its most difficult competitive era in decades. In a key category – running – it has faced disruption by innovative brands like Hoka and On Running.
In China, Anta Sports is now the clear market leader, ahead of global giants like Nike and Adidas. Chinese Gen-Z and Millennials increasingly favour domestic brands that celebrate their heritage through modern designs.
This is reflected in Nike’s most recent fiscal 2026 Q2 results. Revenue in its Greater China market crashed 17% year on year to $1.42bn. China was once seen as a huge growth market for Nike, so this has spooked investors.
Meanwhile, the company’s gross margin fell 300 basis points to 40.6%, largely due to the impact of higher tariffs. Nike manufactures in Southeast Asia and has been hit hard by President Trump’s trade policies. Management expects tariffs to cost it $1.5bn this fiscal year.
Finally, its Converse brand is struggling, with sales falling 30% to $300m. This followed a 27% slump in the first fiscal quarter.
CEO Elliott Hill said the company was in “the middle innings of our comeback“. However, he said it was operating at “nowhere near” its potential.
Earnings per share slumped 30% in the first six months of its fiscal year.
Turnaround potential
Clearly, Nike isn’t the must-have brand it used to be for young consumers. But it’s far from ‘uncool’, and its share of the massive global sportswear market is still around 14% (down from approximately 17% in 2022).
In its core North American market, things look more stable, with Q3 revenue up 9% to $5.63bn.
The company’s also refocusing on innovation, while posting its best-ever Black Friday on the Nike site in November. And management still sees China as a growth market over the long run, despite the severe challenges there right now.
So, I think Nike stock is a strong turnaround contender in the years ahead. My issue is that the stock still looks quite pricey at 38 times forward earnings, while the 2.7% dividend yield isn’t that attractive.
Given the high valuation, and pressures from tariffs and weak China sales, I’m not keen to invest.
I think JD Sports Fashion might be a better option to consider. Nike accounts for around 45% of JD’s sales, so it’s been hit hard due to weak sales. This problem could drag on for a while.
But a 50% share price plunge since January 2024 makes the stock look ridiculously cheap to me, at just 6.6 times forward earnings.
Any successful turnaround at Nike would likely be reflected in a higher JD Sports share price.
