Is NIKE, Inc. (NKE) The Best Stock To Buy In Falling Markets Now?

As the market continues to fluctuate, investors are on the hunt for resilient stocks that can weather the storm. One name that stands out is NIKE, Inc. (NKE), the world's largest sportswear brand. But is NKE the best stock to buy in falling markets now? Let's dive into the factors that make NKE a compelling choice and explore whether the current market conditions present an attractive entry point.



First, let's address the elephant in the room: NKE's recent performance. The stock has been on a rollercoaster ride, with shares down 60% from their previous peak. However, this decline has brought the stock's valuation down to more attractive levels, with the forward P/E ratio now at 26.63, compared to the industry average of 16.39. Additionally, NKE's dividend yield has reached a 15-year high, making it an enticing option for income-oriented investors.

Now, let's explore the factors that contribute to NKE's resilience in falling markets:

1. Strong Brand Recognition: NKE's 'woosh' logo and 'just do it' tagline are widely recognized across the world, which helps maintain customer loyalty even in tough economic times. This brand recognition and loyalty help NKE retain market share despite the recent downturn.
2. Diverse Product Portfolio: NKE offers a wide range of products, including athletic footwear, apparel, equipment, and accessories. This diversification helps mitigate the impact of a slowdown in any one category. For instance, even though running shoe sales have been sluggish, NKE's basketball and training categories have performed well.
3. Global Reach: NKE's global presence allows it to tap into different markets, reducing the impact of economic downturns in any single region. The company's international sales accounted for 57% of its total revenue in the fiscal year 2024, demonstrating its ability to weather regional economic storms.
4. Marketing Expertise: NKE has consistently demonstrated its ability to build brand awareness better than anyone else in the industry. The company's marketing expense was almost double On Holding's total revenue over the last year, highlighting its commitment to maintaining brand visibility.
5. Financial Strength: NKE's strong financial position, with a current ratio of 2.22 and a debt-to-equity ratio of 0.86, provides it with the flexibility to navigate challenging market conditions. The company's robust cash flow also allows it to invest in growth opportunities and maintain its dividend payout.



However, it's essential to consider the challenges NKE faces in the current market environment. The company's sales were down 8% year over year in the November-ending quarter, and analysts expect full-year sales for the May-ending fiscal year to be down 10% year over year. Lower sales are also taking their toll on the bottom line, with NKE's earnings expected to be down 45% for the current fiscal year.

Some of NKE's problems are self-inflicted, as the company implements a strategy to reduce its reliance on promotional discounts to drive more full-price sales. This strategy may lead to stronger profitability over the long term but could pressure sales in the near term as consumers who have grown accustomed to NKE's discounts may turn to other brands.

Moreover, NKE faces increasing competition in the marketplace, with competitors like Lululemon Athletica (LULU), On Holding (ONON), and Deckers Outdoor's (DECK) Hoka all delivering stronger sales growth than NKE. Lululemon's revenue grew 9% year over year last quarter, while On's footwear sales soared 32% over the year-ago quarter. Additionally, Deckers reported a 20% year-over-year increase in sales last quarter, as it continued to report strong demand for its Hoka running shoe.



In conclusion, NKE's strong brand, diverse product offerings, global reach, marketing expertise, and financial strength make it a compelling choice for investors seeking resilience in falling markets. However, the company faces challenges in the near term, including self-inflicted sales pressure and increasing competition. As a result, investors may want to wait for better visibility on sales before committing to the stock. Keep an eye on NKE's earnings reports and analyst estimates for signs of a turnaround, and consider adding the stock to your portfolio when the risk-reward ratio becomes more favorable.