Nike Earnings: Results and Weak Guidance Suggest Turnaround Not Imminent; Shares Undervalued

Although Nike reported second-quarter sales and earnings above expectations, it was a generally poor result by its usual standards. Moreover, the outlook for the rest of fiscal 2025 is dismal as CEO Elliott Hill, on the job since October, intends to increase discounting to clear inventory ahead of new product releases in fiscal 2026. We expect to cut our $117 per share fair value estimate by a mid-single-digit percentage on the results and guidance, but regard Nike’s shares as very undervalued. Our wide moat rating on the firm is based on its brand intangible asset, and we believe Hill is making the right moves to bolster its brand value. His general plan is to invest in Nike’s connections to global sports, which we regard as the firm’s greatest advantage.