NIKE’s three‑month, ~11% slide underscores a digital slowdown and margin stress—still a WAIT, not a buy

What happened

Over the past three months NIKE shares have fallen roughly 11% as investors digested a pronounced digital slowdown, renewed tariff pressure and persistent discounting that together have kept gross margins stuck in the low‑40s. DeepValue’s latest filings show FY25 revenue down ~10% to $46.3B and net income roughly halved, while Q1 FY26 delivered flat revenue but collapsed EBIT margin (7.7%) and another ~320bps of gross‑margin compression. Management is loudly repositioning NIKE Digital toward full‑price, cutting legacy footwear supply and leaning on wholesale and marketing to rebuild brand heat, but independent surveys report continued share loss among Gen‑Z and lifestyle segments—so the reset reads as multi‑quarter, not a one‑off. At the current market price (~$65) the stock trades at ~33x depressed EPS and sits modestly above a conservative DCF (~$57), leaving limited margin of safety if margins remain in the low‑40s. In short, the Zacks note on the recent three‑month slide amplifies existing DeepValue concerns: the move is a reminder of execution risk and does not yet provide operational proof that would justify a constructive reopening of the long‑term thesis.

Implication

The pullback increases the chance of a better entry price but does not alter the core risk profile: NIKE still needs demonstrable gross‑margin stabilization (mid‑40s direction), durable digital/NIKE Direct growth, and signs of regained lifestyle share. Investors should watch quarterly gross‑margin trends, digital comparable sales, inventory vs. sell‑through and Greater China revenue as primary catalysts; absent clear improvement, the equity risks prolonged multiple compression. Given a conservative DCF near $57 and current trading above that level, the margin of safety is limited—opportunistic, small tranches only if price drops nearer intrinsic value or if operational evidence emerges. Maintain discipline on position sizing and use objective stop/trim triggers tied to the company’s execution metrics rather than headline volatility. For value investors, patience for proof of turnaround remains the prudent course.

Thesis delta

The new article’s focus on a recent 11% three‑month decline reinforces, rather than overturns, our prior WAIT judgment: it heightens the near‑term probability of a lower entry price but does not supply the operational evidence (margin recovery, digital inflection, China stabilization) needed to upgrade the thesis. Practically, the update modestly widens the upside from a lower price but tightens downside risk if NIKE cannot arrest digital share loss or margin erosion.