Nike Stock (NKE) at a 6-Year Low: Is the Dip a Buying Opportunity Ahead of Q4 Earnings?

Nike's stock (NKE) has hit a 6-year low, trading below $61 as of June 19, 2025, marking its weakest level since June 2019. With the company set to report Q4 fiscal 2025 earnings on June 26, investors are weighing whether this price slump presents a compelling entry point. This analysis explores fundamental valuation, earnings catalyst potential, and technical rebound signals to determine if NKE is primed for a rebound—or if the risks still outweigh the rewards.

Fundamental Valuation: Undervalued or Overdue for a Reset?

Nike's valuation metrics suggest a discount relative to its historical averages. Its trailing P/E ratio of 19.77 as of June 2025 is well below its 10-year high of 83.63 and even below its sector median. The forward P/E of 28.49, based on an estimated $2.15 EPS for fiscal 2025, implies a 27% upside from current prices to reach the consensus price target of $78.15. However, this optimism hinges on execution:

• Margin Pressure: Gross margins have compressed to 39-40% (down from a 5-year average of 44%) due to tariffs and inventory clearance.
• Cash Reserves: A fortress balance sheet with $10.39 billion in cash provides a cushion for cost-cutting and strategic pivots.
• Dividend Stability: A yield of 2.61% (up from $0.37 in 2024 to $0.40 in 2025) offers income appeal despite earnings volatility.

Earnings Catalysts: Can Q4 Deliver a Turnaround?

Nike's Q4 earnings (ending May 2025) are projected to show a 15% revenue decline to $10.71 billion and an 87% EPS drop to $0.12, reflecting ongoing headwinds. However, three catalysts could spark optimism:

1. Cost Control & Inventory Turnaround:
2. Nike's $2 billion cost-cutting plan (through 2027) targets logistics and overhead.

3. Inventory levels fell 2% YoY in Q3, signaling progress in clearing excess stock. A further reduction in Q4 could alleviate margin pressures.

4. Premium Innovation:

5. The shift toward high-margin premium products (e.g., collaborations with influencers like Kim Kardashian) may stabilize margins. Analysts note that Nike's “Win Now” strategy could yield results by late 2026.

6. China & North America Recovery:

7. North America (its largest market) and Greater China (down 20% YoY in Q3) need stabilization. Positive commentary on demand or market share gains could lift sentiment.

Technical Rebound Signals: A Bottom in Sight?

Technically, NKE's price action shows signs of a potential bottom:

• Support at $58: The May 2025 low of $58.30 has held as support, with a rebound to $60.83 in late June.
• RSI Oversold Recovery: The 14-day RSI briefly dipped below 30 (oversold territory) in May but has since risen to ~45, signaling reduced bearish momentum.
• Volume Dynamics: A surge in trading volume to 77 million shares in April 2025 suggests institutional buying interest.

Risks to Consider

• Inventory Overhang: Clearance sales of legacy products (e.g., Jordan sneakers) risk further margin erosion.
• Geopolitical Risks: Escalating U.S.-China trade tensions could delay tariff relief.
• Earnings Volatility: Historical post-earnings performance shows a -5.79% CAGR over five years, with a 38% maximum drawdown.

Investment Thesis & Recommendation

Nike's valuation is compelling, but investors must balance near-term risks with long-term potential:

• Bull Case: A Q4 earnings beat or positive guidance on margin stabilization and China recovery could spark a rally toward $70–$75. The dividend yield and cash reserves add a safety net.
• Bear Case: Persistent margin pressures or another earnings miss could push NKE toward $55.

Actionable Strategy:
- Buy on dips below $60, with a stop-loss below $55.
- Hold for 3+ years to capitalize on the “Win Now” turnaround, targeting a 2026 EPS rebound.
- Avoid aggressive calls: Options traders might use diagonal put spreads to exploit volatility while limiting downside exposure.

Conclusion

Nike's 6-year low presents a high-risk, high-reward opportunity. While fundamental and technical indicators suggest undervaluation, the path to recovery hinges on Q4 earnings delivering margin clarity and market stabilization. Investors with a long-term horizon and tolerance for volatility may find NKE worth accumulating—provided they size positions carefully and remain alert to execution risks.

Final Take: Buy-the-dip candidate with a cautious stance ahead of Q4 results.