Nike Is Still in the S&P 500. That's the Least Reassuring Reason to Buy It.

Here is the darkest joke in Nike's investor playbook: the stock has lost about 80% of its value from its 2021 peak near $179, erasing roughly $230 billion of market capitalization down to about $55 billion, and the company is about to be cast out of one blue-chip index. The reassurance being offered to shareholders is that Nike is still in the S&P 500. It is. That is nearly the only unambiguously good thing left to say.

The demotion is real and timed. S&P Dow Jones Indices announced in early September that Nike will be removed from the S&P 100 before trading opens on September 21, ending an 18-year run in that index. Dell, Palo Alto Networks, Arista Networks, and SanDisk move up from the broader S&P 500 to take its place. The mechanics matter for index funds that track the S&P 100, which now must sell Nike shares, but the event is mostly a badge: it caps a two-year slide and makes plain how far the world's largest sportswear maker has fallen from blue-chip standing.

The same logic that explains the demotion explains why the reassurance is hollow. S&P 100 membership is effectively a ranking of the biggest blue chips; dropping out signals lost stature. S&P 500 membership, by contrast, rests on market capitalization and profitability, and at a market value above $55 billion Nike is nowhere near the cutoff. So the reassurance is technically accurate and almost empty — a company confident enough to still call itself big, not a sign its business has turned.

The cheap multiple flatters a shrinking business

The stock sure looks like a bargain after an 80% drawdown. It trades near 18 times trailing earnings, about 12 times EV/EBITDA, and yields roughly 4.4% in dividends — a valuation that would normally make a defensive consumer name interesting. That screen is flattered by a one-time number.

In the quarter ended May 31, Nike reported revenue of $10.97 billion, down about 1% from a year earlier, and earnings per share of 72 cents. That 72 cents included a 52-cent benefit tied to the expected recovery of import tariffs. Strip it out and the underlying quarter earned roughly 20 cents a share. Gross margin jumped 890 basis points to 49.2% in the quarter, but management attributed the gain primarily to a $986 million one-time tariff recovery, not to operating leverage or pricing power. Cheap is different from undervalued: the headline earnings that anchor the low multiple carry a huge, non-recurring tax credit.

The durable numbers point the same direction

Underneath the one-time boost, the operating evidence the turn depends on has not arrived. Revenue for the full fiscal year was flat. China, long the growth engine, has now posted six consecutive quarters of declining sales — footwear there fell 21% in one recent quarter. CEO Elliott Hill, back two years on a "Win Now" plan that refocuses on core sports and rebuilds the wholesale relationships his predecessor cut, is drawing open investor impatience.

Management is not promising a fast fix. For the current quarter, Nike guided revenue down in the low-to-mid single digits, with more deceleration expected after that, and said earnings should stay "relatively flat" into the start of fiscal 2027. In other words, the growth story that used to justify a premium multiple is not merely absent; it is projected to get worse before it gets better.

The dividend is the last question

The one support that does not depend on the turnaround is the payout. Twenty-four straight years of dividends, a yield near 4.4%, and a balance sheet with roughly $1 billion of net cash make the income real. But a yield is only as durable as the cash flow behind it, and that cushion is thinning: trailing free cash flow was about $2.2 billion, down a third from a year earlier, and the payout ratio sits near 77%. A company with flat revenue and declining cash generation can honor a dividend for a while; it cannot do so while also funding a turnaround indefinitely if the slide continues.

Too early, not yet cheap enough to ignore

The honest read is that the market has not mispriced the next operating phase — it has priced it about right. A stock that falls 80% while revenue stays flat, China keeps shrinking, and guidance points further down is a multiple compression that has roughly matched the business deterioration, not a valuation that has run ahead of the bad news and now offers a bargain for the patient.

Index membership is the wrong frame for this decision. Whether Nike sits in the S&P 500 is a function of its size, not its health; the winking reassurance tells you more about how far the conversation has fallen than about where the stock goes next. The tests that matter are operational and can be counted within the next few quarters: does the underlying (tariff-adjusted) margin hold, does China stabilize, and does quarterly revenue stop decelerating? Nike reports its first fiscal-2027 quarter on October 1, and analysts broadly expect real progress to show up only through calendar 2027. Until the durable numbers — not the one-time tariff money — begin to turn, this is a falling asset with a comfortable yield, a case for waiting rather than catching.