NIKE, Inc. (NKE)
Consumo discrecional / Indumentaria y calzado deportivo
NIKE trades at multi-year lows following guidance for a fresh revenue decline in fiscal year 2027, with Greater China and Converse still in the middle of a reset; the brand and scale moat remains intact but is narrowing, and the current price only moderately compensates for the risk that the recovery takes longer than expected to restore margin and market share.
- Price
- $39.77
- Intrinsic value (5y, base)
- $42
- Total annual return (5y)
- 5.3%
- Status (nominal)
- Fairly valued
- Margin of safety
- +4%
The essentials
- FY2026 revenue flat in reported terms (US$46.4 billion) but −2% at constant currency, with Greater China down 13% and Converse down 31% in units.
- Comparable net income (normalized for the non-recurring IEEPA tariff benefit and restructuring charges) sits at around a 5.7% margin, well below the 9-11% of fiscal years 2023-2024.
- Normalized return on invested capital is around 17%, comfortably above the 10% bar, which sustains the quality of the business despite the decline in earnings.
Intrinsic value — two valuation methods
Total return at 5 years: 5.3%/year = 0.9% appreciation + 4.4% dividend. The target price ($42) is ex-dividend; the $9 in dividends collected over 5 years are added separately.
The methods disagree: one places the value today above the price ($40) and the other below.
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $40 trades ~3.6% below its value discounted to today (~$41); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($42) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$27.
Thesis
The business
A global-brand, capital-light business with return on capital still solid (normalized ROIC around 17%, above the 10% bar), but going through a marketplace reset with share losses in Greater China and Converse. The moat remains real —brand, intellectual property, manufacturing scale and proprietary distribution— but its direction is one of erosion, not widening.
The valuation
It is valued by P/E on comparable net income, normalized for the non-recurring IEEPA tariff recovery benefit and the fiscal year 2026 restructuring charges. With a base-case exit multiple of 17x (within the 15-20x branded-apparel band, toward the low-middle end given the moat erosion), the 5-year value is $42 per share, against a market price of $40.
The margin of safety
The expected total return at the market price is +5%, which places the verdict at Fairly valued. It trades close to intrinsic value, far from the required margin of safety. The dividend contributes a meaningful part of the total return given the current 4.2% yield, although its growth slowed markedly (from +9.4% to +3.8% year over year) in line with the pressure on earnings.
What to watch
The central disconfirmer is whether the guidance for a fresh revenue decline in fiscal year 2027 turns out to be the cycle's floor or the start of a longer deterioration. Greater China is the critical variable: if the structural weakness (declining store traffic, elevated promotional intensity, digital sales down 29% for the year) does not stabilize within the path's horizon, the adverse scenario (+5%) becomes the more likely outcome instead of the base case.
Educational / informational. Does not constitute investment advice.