NIKE, Inc. (NKE): A Bear Case Theory 

We came across a bearish thesis on NIKE, Inc. on Uncle Stock Notes’s Substack. In this article, we will summarize the bulls’ thesis on NKE. NIKE, Inc.’s share was trading at $65.39 as of December 1st. NKE’s trailing and forward P/E were 33.53 and 40.32, respectively according to Yahoo Finance.

Nike’s Q1 FY2026 results underscore a company in transition, struggling to find footing amid mounting competitive and operational pressures. While total revenue rose a modest 1% year-over-year to $11.7 billion, the composition of growth revealed deeper issues—North American revenue declined 3%, and Nike Direct sales fell 4%, undermining years of effort to build a high-margin D2C model. Instead, wholesale sales grew 7%, signaling a tactical reversal as Nike leans on retail partners to offset direct-channel weakness. This shift, though necessary in the short term, highlights the strain on Nike’s once-vaunted brand power and consumer connection.

Gross margin deterioration was the most alarming signal, plunging 320 basis points to 42.2% due to elevated product costs, unfavorable currency effects, and widespread discounting to clear excess inventory. The erosion of pricing power underscores the weakening of Nike’s brand premium—a critical concern for a company long defined by its aspirational positioning. Management’s “Win Now” initiative, intended to reignite core categories such as running and basketball, remains in early stages, with little evidence yet of meaningful financial impact.

Regionally, softness in Greater China and continued weakness in North America offset moderate growth in EMEA and APLA. The company’s reluctance to issue guidance reflects uncertainty about the near-term outlook, as inventory challenges, macro headwinds, and rising competition from brands like Hoka and On weigh on visibility. Though Nike’s global scale, supply chain strength, and distribution network remain significant advantages, the quarter revealed a brand in search of renewed identity and strategic clarity. For now, sentiment skews bearish as the company’s transition from stagnation to sustainable growth remains incomplete.

Previously, we covered a bullish thesis on NIKE, Inc. (NKE) by Any_Chocolate6194 in May 2025, which highlighted the company’s brand dominance, leadership renewal, and long-term recovery potential. The company’s stock price has appreciated by approximately 5.33% since our coverage. This is because the recovery thesis has yet to fully play out. Uncle Stock Notes shares a contrarian but emphasizes near-term execution and D2C challenges.

NIKE, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 81 hedge fund portfolios held NKE at the end of the second quarter which was 81 in the previous quarter. While we acknowledge the risk and potential of NKE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NKE and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.