NKE Rallies 19% in a Month: Time to Buy the Hype or Wait for Proof?

NIKE Inc. NKE stock has shown a marked recovery in the past month, with shares rising as much as 19.3%. With this increase, the company’s shares have outpaced the broader Shoes and Retail Apparel industry and the Consumer Discretionary sector’s growth of 15.3% and 3.9%, respectively. Also, the NKE stock has outpaced the S&P 500’s growth of 4.8% in the same period.

This Beaverton, OR-based athletic shoes and apparel retailer’s share performance is notably stronger than its competitors lululemon athletica inc. LULU and adidas ADDYY, which have gained 1.8% and 3.9%, respectively, in the past month. NKE has also lagged Birkenstock Holding PLC’s BIRK decline of 4.7% in the same period.

NIKE’s 1-Month Price Performance

At the current share price of $72.47, the NKE stock trades 38.6% above its 52-week low of $52.28. Meanwhile, the NKE stock trades 20% below its 52-week high of $90.62. NIKE trades above its 50 and 200-day moving averages, indicating a bullish sentiment.

NKE Stock Trades Above 50-Day & 200-Day Moving Averages

What’s Behind NIKE Stock’s Momentum?

The NKE stock recently gained pace, thanks to the strategic reset under its “Win Now” initiative, which focuses on revitalizing the brand’s core strengths in sport, innovation and marketplace execution. Despite a challenging fourth-quarter fiscal 2025, management highlighted visible progress in reenergizing performance products, driving emotional storytelling around sports moments, and tightening operations around key franchises. These efforts have been restoring NIKE’s brand identity and improving sell-through rates, especially in the running and basketball segments.

A major part of this turnaround stems from NIKE’s aggressive push into sport-specific strategies. The company has reorganized into dedicated teams by sport, launched impactful campaigns around major events like the French Open and WNBA season, and introduced signature products such as A’ja Wilson’s A-ONE, which sold out in minutes. Wholesale partners are responding positively, and NIKE Direct is slowly regaining its premium positioning, particularly through sport-led product drops and experiences like the LA After Dark Run Series.

On the operational side, NIKE is managing down inventory, segmenting the marketplace more effectively, and expanding through partnerships. These moves, coupled with positive wholesale order books and innovation in the pipeline, signal a path toward sustainable recovery and reignited investor confidence.

Do NKE’s Estimate Revisions Reflect This Optimism?

The Zacks Consensus Estimate for NIKE’s fiscal 2026 and 2027 earnings per share (EPS) has declined 11.6% and 3%, respectively, in the past 30 days. The downward estimate revision trend is an indication of deeper trouble for the company despite positive order backlog and progress on growth strategies.

For fiscal 2026, the Zacks Consensus Estimate for NKE’s revenues and EPS implies 1.6% and 22.7% year-over-year declines, respectively. The consensus mark for fiscal 2027 revenues and EPS indicates 6.1% and 55% year-over-year growth, respectively. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

What is Driving Down NIKE’s Estimates?

The downward estimate revisions for NKE reflect more than just caution. The lowered estimates indicate persistent structural challenges that continue to weigh on near-term performance despite signs of operational progress.

While the company is gaining traction with its "Win Now" strategy and seeing green shoots in wholesale demand and performance product sell-through, fourth-quarter fiscal 2025 results painted a sobering picture. Revenues declined 12%, NIKE Digital was down 26%, and the gross margin fell 440 basis points (bps) due to higher discounts, channel mix shifts, and supply-chain deleverage.

A significant contributor to lowered expectations is the steep drop in NIKE’s legacy franchises, Air Force 1, Dunk and AJ1, which collectively created nearly a $1-billion revenue headwind in the fiscal fourth quarter. These declines are expected to persist through the first half of fiscal 2026. Compounding matters, NIKE faces new tariff-related cost pressures, with a projected $1-billion incremental impact and a 75-bps drag on the gross margin for fiscal 2026.

For the first quarter of fiscal 2026, NIKE expects revenues to decline in the mid-single digits and the gross margin to contract by 350-425 bps, indicating both tariff impacts (approximately 100 bps) and continued channel adjustments. SG&A is expected to grow, seeing a low-single-digit rate. These projections highlight that while long-term fundamentals may be stabilizing, near-term turbulence remains a reality.

Is NKE’s Premium Valuation Justified?

While NIKE remains fundamentally strong, backed by its decisive actions to reposition itself for sustainable and profitable long-term growth, its current forward 12-month price-to-earnings (P/E) multiple of 40.36X raises concerns about whether the stock's valuation is justified. This multiple is higher than the Zacks Shoes and Retail Apparel industry average of 29.34X and the S&P 500’s average of 22.71X, making the stock appear relatively expensive.

At 40.36X P/E, the Swoosh brand owner is trading at a much higher valuation than its competitors. Its competitors, such as lululemon, adidas and Birkenstock, are trading at more reasonable multiples. lululemon, adidas and Birkenstock have forward 12-month P/E ratios of 15.27X, 21.85X and 22.55X — all significantly lower than NIKE. At such levels, NKE’s valuation seems out of step with its growth trajectory, especially given the recent decline in its stock price.

The stock's elevated valuation reflects high investor expectations for growth. However, compared with the above-mentioned competitors, NIKE looks increasingly vulnerable in an environment wherein market participants are growing cautious about overpriced Consumer Discretionary stocks. NKE’s ability to meet or exceed these lofty expectations is crucial in justifying its premium pricing.

Is NIKE a Wise Investment Now?

NKE remains a fundamentally solid player in the consumer discretionary space, with a world-class brand, deep athletic partnerships, and a clear strategic roadmap in place. Its recent stock rally reflects growing investor optimism around the company’s reset initiatives, including a renewed focus on sport-led innovation, tighter marketplace execution and stronger wholesale relationships. These efforts have helped reenergize product momentum and restore confidence in Nike’s long-term positioning.

However, despite this positive narrative, NIKE’s near-term outlook remains clouded by multiple headwinds. The company continues to work through legacy inventory challenges, digital channel softness and new tariff-related cost pressures, factors that contributed to a cautious first-quarter fiscal 2026 guidance and downward earnings revisions. While the company is taking deliberate steps to address these issues, the recovery is expected to be gradual and uneven.

Given this backdrop, NIKE’s premium valuation appears stretched, especially relative to its industry peers. Until the company delivers consistent top-line growth and margin stabilization, the stock may struggle to attract broader investor interest. For now, the Zacks Rank #4 (Sell) stock reflects a prudent stance, as the market awaits clearer signs of sustainable recovery to justify its elevated pricing.

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This article originally published on Zacks Investment Research (zacks.com).

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