Key Points
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This company is in the midst of a major turnaround, but results have remained sluggish.
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Headwinds may subside this year, leading to strong earnings-per-share growth.
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The stock looks very attractive at its current valuation.
After years of seeing growth stocks dominate the market, many analysts are predicting a shift toward value stocks in 2026. The best value stock opportunities are typically companies with wide competitive moats that may be facing temporary setbacks. One such opportunity is Nike (NYSE: NKE).
The company is currently in the midst of a turnaround effort, and it’s seen a sizable impact from the Trump administration’s tariff policies over the past year. But patient investors looking for an outstanding value stock to buy with just $100 may have a great one in Nike.
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Leaning on its strengths to Win Now
Nike’s financial results deteriorated under former CEO John Donahue. His focus on direct-to-consumer sales and product segmentation by gender (instead of sport) didn’t lead to the increase in profits expected. The board replaced Donahue with veteran executive Elliott Hill in 2024.
Hill’s Win Now turnaround strategy relies on Nike’s strong brand and ability to innovate in athletic wear. Its marketing now leans into those strengths. He’s also renewing wholesale agreements to expand sales channels and reinvigorate revenue growth.
Wholesale revenue improved 8% in its most recent quarter, but overall sales growth remains sluggish — flat on a currency-neutral basis. With more sales coming from wholesale channels, along with the weight of tariffs on its cost of goods, gross margin contracted 3 percentage points.
But there are bright spots in those results. North America saw revenue grow 9%, and Europe grew 3% before adjusting for foreign-exchange headwinds. Both growth rates are accelerating.
China remains a big drag on its financial results, with sales in the region down 17% year over year last quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) fell sharply, down 49%. But China is a big opportunity for Nike in the long run. Not only does it already have strong brand recognition in the region, but the Chinese government is also promoting sports and fitness. Its goal is to expand the sports industry into a $1 trillion market by 2030, nearly doubling from 2023 levels.
Nike may continue to struggle through the rest of fiscal 2026, which ends in May. But as it laps the impact of Trump tariffs and the declining profitability in China, Hill’s Win Now efforts should start to show progress over the next year. Margins will expand again as wholesale customers reduce the cost of inventory management and help reinvigorate sales growth. It may also be able to offset the impact of tariffs with supply chain shifts and passing through price increases to customers in the U.S.
Analysts see a strong rebound in Nike’s earnings per share next year, with the average on Wall Street at $2.47 for fiscal 2027, increasing from $1.75 for the fiscal year that ends in May. With the stock price just over $60, the shares trade for about 25 times forward earnings. That might seem expensive for a company that’s not growing at a breakneck pace. But Nike could see a substantial revenue rebound over the next few years while steadily expanding margins back to pre-pandemic levels and beyond, producing excellent earnings-per-share growth.
At its current price, investors with $100 and who are interested in a value stock might not find many stocks with a better value than Nike shares right now.
Should you buy stock in Nike right now?
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Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.