NIKE's Premium P/E & Fresh Rally: Time to Accumulate or Stay Cautious?

NIKE Inc. NKE remains fundamentally strong, backed by its decisive actions to reposition itself for sustainable and profitable long-term growth. However, the company’s current forward 12-month price-to-earnings (P/E) multiple of 41.31X raises concerns about whether the stock's valuation is justified. This multiple is higher than the Zacks Shoes and Retail Apparel industry average of 30.99X, making the stock appear relatively expensive.

The high price-to-sales (P/S) ratio of NIKE, a Beaverton, OR-based global leader in athletic footwear, apparel, equipment and sports-related accessories, adds to investor unease, especially considering its low Value Score of D, which suggests that it may not be a strong value proposition at the current levels. The company has a forward 12-month P/S ratio of 2.5X compared with the industry’s 2.13X multiple.

NIKE’s Premium Valuation Surpasses Peers

At 41.31X P/E, the Swoosh brand owner is trading at a much higher valuation than its competitors. Its peers, such as adidas AG ADDYY, Skechers SKX and Wolverine World Wide WWW, are delivering solid growth and trade at more reasonable multiples. adidas, Skechers and Wolverine have forward 12-month P/E ratios of 18.3X, 16.19X and 21.62X — 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 as 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.

Nonetheless, NIKE’s shares have witnessed a remarkable recovery in the year-to-date period, after a sharp recent decline. The stock’s renewed momentum can be attributed to the positive sentiment surrounding its strategic reset under the “Win Now” initiative, which focuses on revitalizing the brand’s core strengths in sport, innovation and marketplace execution. 

NKE shares have risen 3.9% in the year-to-date period, outperforming the broader industry’s 1.4% growth. However, the stock still lags the Consumer Discretionary sector’s rally of 11.4% and the S&P 500’s growth of 9.4% in the same period.

NKE’s performance is notably stronger than that of its competitors, adidas and Skechers, which have declined 19.6% and 6.2%, respectively, in the year-to-date period. However, NIKE has underperformed Wolverine’s rally of 41.9% in the same period.

NKE’s YTD Stock Performance

At the current price of $78.65, the NKE stock trades 13.2% below its 52-week high of $90.62. The current stock price is 50.4% above its 52-week low mark of $52.28. NKE trades above its 50 and 200-day moving averages, indicating a bullish sentiment.

NIKE Stock Trades Above 50 & 200-Day Moving Averages

Is NKE’s Stock Rally Built to Last or Vulnerable to Setbacks?

NIKE’s recent stock rally reflects investor optimism around its “Win Now” initiatives, which are beginning to show tangible progress. The company has reignited brand energy by doubling down on sport-led storytelling, key product launches and stronger wholesale partnerships. Signature activations, like the Vomero 18 in running and A’ja Wilson’s debut basketball line, are resonating with consumers, helping NIKE rebalance its portfolio toward performance products while reducing its dependence on legacy franchises such as the Air Force 1 and Dunk.

NIKE is reorganizing into sport-specific teams, aiming to drive sharper innovation and deeper consumer connections across running, basketball, training and global football. Strategic marketplace segmentation, an expanded distribution network, including a new partnership with Amazon, and premium positioning for NIKE Direct signal a more disciplined, long-term growth framework. Early signs are encouraging, with holiday order books improving sequentially and stronger full-price sell-through in North America and EMEA.

However, risks remain. The financial performance in fiscal 2025 reflected weaker top-line growth, pressured margins and heavy promotional activity. NIKE must navigate ongoing macro headwinds, including tariff-driven cost pressures estimated at $1 billion, sluggish recovery in Greater China, and persistent weakness in digital traffic. Management expects progress but acknowledges that a full turnaround will take time, particularly as classic franchise declines continue through early fiscal 2026.

In essence, NIKE’s rally rests on execution: if its sport-focused realignment and innovation pipeline delivers as planned, momentum may increase. But elevated tariffs, inventory resets and regional challenges leave the outlook finely balanced.

NIKE’s Estimate Revision Trend

The Zacks Consensus Estimate for NIKE’s fiscal 2026 earnings per share (EPS) has declined 1.2% in the past 30 days. Meanwhile, the consensus estimate for fiscal 2027 has been unchanged 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 1.3% and 21.8% year-over-year declines, respectively. The consensus mark for fiscal 2027 revenues and EPS indicates 6% and 53.7% year-over-year growth, respectively.

Is it Wise to Retain Positions in NKE Stock?

NIKE’s turnaround journey is gaining traction, with the recent stock recovery signaling renewed investor optimism around its “Win Now” initiatives and innovation-led growth pipeline. The company’s ability to reset its portfolio, reinvigorate its brand voice, and strengthen wholesale and direct-to-consumer channels positions it well for long-term success. However, the stock trades at a premium to peers, which may deter new entrants. Near-term challenges, including tariff-related cost pressures, sluggish demand recovery in China, and lingering inventory headwinds, may also temper its upside momentum.

For existing shareholders, NIKE remains a solid long-term story worth holding, given its strong global brand, innovation pipeline and structural growth drivers. Prospective investors may find better entry points by waiting for dips, as valuation resets may align more favorably with fundamentals.

Overall, the Zacks Rank #3 (Hold) stock’s recent recovery reflects hope, but the path forward will demand patience and flawless execution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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