Nike Slides 2.6%—What's Behind the Selloff?

• Nike (NKE) plunged 2.56% to $72.71, hitting an intraday low of $72.40 amid renewed skepticism over its turnaround strategy.
• The stock’s 30.3x earnings multiple clashes with a 10% revenue decline and 44% net profit collapse last year, sparking investor doubts.
• Converse’s leadership shakeup—replacing CEO Jared Carver with Aaron Cain—highlighted its 19% annual sales slump, underscoring Nike’s brand portfolio struggles.
• Sector peers like Under Armour (UAA) also dipped 2.6%, suggesting broader apparel sector volatility.

Nike’s Friday selloff capped a volatile week, with shares seesawing after a brief Thursday rally. Analysts now question whether management’s moves can offset eroding profitability and overvaluation concerns.

Converse Turnaround Efforts Spark Immediate Doubts
The immediate catalyst for Nike’s slide was its announcement of a leadership overhaul at Converse, its struggling subsidiary. Replacing CEO Jared Carver with Aaron Cain—a 21-year Nike veteran—was framed as a turnaround play. However, the move inadvertently underscored Converse’s dire performance: its sales plunged 26% in Q4 and 19% annually, far outpacing Nike’s overall 10% revenue decline. Investors interpreted the shakeup as an admission that Converse remains a drag on the parent company’s financial health, compounding worries over Nike’s broader brand relevance. Analysts noted that even optimistic growth forecasts of 7% annual EPS expansion fall short of justifying its rich 34.5x P/E multiple.

Apparel Sector Weakens as Under Armour Also Slides
The broader apparel sector mirrored Nike’s struggles, with Under Armour (UAA) falling 2.6% to its lowest level in months. Both companies face similar headwinds: declining brick-and-mortar sales, shifting consumer preferences toward athleisure alternatives, and overextended valuation multiples. While luxury peers like LVMH or Ralph Lauren have leveraged premium pricing and experiential retail to outperform, mass-market athletic brands are grappling with inventory overhangs and eroding margins. Nike’s situation stands out, however, due to its reliance on underperforming legacy brands like Converse, which now risks overshadowing its core sneaker business.

Bearish Options Signal Continued Pressure—Focus on Puts Near Support
Bollinger Bands: Lower band at $53.41 suggests short-term support, but current price near $72.71 remains far above this level.
RSI: 81.18 (overbought), though this may reflect prior bullish momentum rather than current conditions.
MACD: Positive crossover (3.71 vs 2.85), but diverges from recent price action, signaling potential bullish exhaustion.
Moving Averages: Below 200-day ($71.53) but above 30-day ($65.43), indicating a near-term tug-of-war between bears and bulls.

Trade Setup: The $62.57–$63 30-day support zone is critical. Below this, a drop toward the $53.41 Bollinger low could accelerate. For aggressive traders, consider NKE20250718P67 (strike $67, expiring 7/18) offering 1,214% leverage with Delta -0.04 and Gamma 0.024. Its Theta -0.0108 means time decay favors sellers. Alternatively, NKE20250718P68 (strike $68) provides 911% leverage with Delta -0.057 and Gamma 0.035—ideal for betting on further downside. Both contracts have high turnover ($2.76M combined), ensuring liquidity.

Payoff Example (5% downside to $69.07): NKE20250718P67 would gain $0.93 intrinsic value, while NKE20250718P68 rises $0.73.

Bottom Line: Short-side plays dominate here. Avoid calls until price recovers above the $77.15 consensus target or the $71.53 200-day MA.

Backtest NIKE Stock Performance
Nike (NKE) has historically shown positive short-to-medium-term performance following a -3% intraday plunge. The backtest data reveals that:1. Frequency and Win Rates: The event occurred 623 times over the past five years. The 3-day win rate is 48.64%, the 10-day win rate is 48.80%, and the 30-day win rate is 47.03%. This indicates a higher probability of a positive return in the immediate aftermath of the plunge.2. Returns: The average 3-day return is -0.01%, the 10-day return is 0.03%, and the 30-day return is 0.05%. This suggests that while there may be some short-term volatility, Nike tends to recover and even exceed its pre-plunge levels in the following weeks.3. Maximum Return: The maximum return observed following the event is 0.08%, which occurred on day four. This highlights that while the recovery may not always be immediate, there is a potential for Nike to bounce back and achieve modest gains in the aftermath of a -3% intraday plunge.In conclusion, Nike's performance following a -3% intraday plunge has historically been positive, with a higher win rate and returning value. Investors may consider this information when assessing the potential impact of such events on their investment strategy.

Nike's Turnaround Tale Faces a Rough Road—Avoid Until Valuation Aligns
Nike’s Friday plunge underscores a stark reality: its stock price no longer aligns with its financial trajectory. With earnings shrinking and its flagship brands losing relevance, the path to growth remains unclear. The sector’s broader slump—exemplified by Under Armour’s 2.6% drop—adds to near-term headwinds. Investors should focus on two critical signals: 1) Whether Converse’s new leadership can reverse its 26% quarterly sales collapse, and 2) If Nike can cut costs enough to justify its 30x+ multiple. Until then, the stock remains overvalued and vulnerable to further declines. Watch for a decisive break below $62.57—the 30-day support—to confirm a deeper bearish trend. For now, the trading mantra remains: avoid until fundamentals catch up with price.