Can Recent NIKE Price Drops Signal a Fair Entry Point for Investors in 2025?

• Wondering if NIKE stock is a value play in today’s market? You’re not alone, as plenty of investors are searching for overlooked opportunities or warning signs right now.
• After another sharp 7.0% drop in the past week and a tough 16.6% year-to-date slide, NIKE’s share price is forcing investors to rethink its potential upside and risk profile.
• Recent headlines have zeroed in on NIKE’s challenges in global demand and shifting consumer habits, sparking debate among analysts about how quickly the brand can return to growth. At the same time, ongoing innovation and strategic partnerships in the athletic wear space have kept the stock in the news spotlight.
• Currently, NIKE scores just 1/6 on our undervalued checks, meaning there are some concerns about its current price tag. Let’s break down the most common valuation methods used for companies like NIKE, but keep reading to discover a smarter way to reach a well-rounded verdict on fair value.

NIKE scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: NIKE Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a widely used valuation approach that estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s value. This method helps investors understand what a business is truly worth based on its ability to generate cash in the coming years.

For NIKE, analysts estimate the company’s current Free Cash Flow at approximately $2.85 Billion. Over the next ten years, these cash flows are expected to grow steadily, reaching about $5.89 Billion in 2030. The initial five-year projections are grounded in analyst estimates, while later years are extrapolated based on industry trends and company performance. All projections and valuations are denominated in USD, matching NIKE’s reporting currency.

According to the DCF analysis, NIKE’s intrinsic value is calculated at $62.09 per share. This figure is just 1.1% higher than the current market price. This indicates that the stock is trading very close to its estimated fair value based on long-term cash flow prospects.

Result: ABOUT RIGHT

NIKE is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for NIKE.

Approach 2: NIKE Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a popular valuation metric for profitable companies like NIKE because it directly links the company’s share price to its actual earnings, offering a quick snapshot of how the market is valuing a dollar of current profit. For established brands with consistent earnings power, the PE ratio provides an intuitive reference point when comparing investments.

However, what counts as a “normal” or acceptable PE ratio depends on investors’ expectations around company growth and risk. Higher growth prospects or lower risks often justify higher PE multiples, while companies facing tougher earnings outlooks or bigger uncertainties usually trade at a discount.

Currently, NIKE trades at a PE ratio of 31.4x, noticeably above the broader luxury industry average of 19.35x and higher than its peer group’s average of 25.9x. This suggests that the market is attaching a premium to NIKE’s earnings, likely for its global brand strength and future growth potential. Instead of relying solely on broad comparisons, Simply Wall St’s proprietary Fair Ratio tool sets a personalized benchmark in this case, a Fair Ratio of 24.7x by blending expected earnings growth, profit margins, industry dynamics, company size, and risk factors. This tailored approach captures NIKE’s specific profile more accurately than a simple industry or peer check.

With NIKE’s actual PE ratio moderately above its Fair Ratio, the stock appears somewhat expensive relative to its fundamentals. The gap, however, is not extreme, so the valuation sits in a neutral zone, neither a clear bargain nor wildly overpriced.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your NIKE Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple way for investors to lay out their unique story behind the numbers by sharing what they believe about a company’s future revenue, earnings, and profit margins, and connecting that story directly to an estimated fair value for the stock.

Unlike one-size-fits-all ratios or formulas, Narratives allow you to bring in what matters most to you, whether it is NIKE’s global brand power, its struggles with demand, or potential new growth, and quickly see how those assumptions translate to financial outcomes. Narratives live on the Simply Wall St Community page, where millions of investors can easily build, update, and discuss their perspectives, making the investing process more approachable than ever.

With Narratives, you can instantly compare your own fair value for NIKE against the current share price, helping decide if now is the right time to buy or sell based on your outlook. Because Narratives update automatically when big news or earnings reports are released, your perspective and fair value stay current with the latest market changes.

For example, some investors on Simply Wall St currently estimate NIKE’s fair value as high as $96.60 or as low as $38.00, showing just how much perspectives can differ using the Narrative approach.

Do you think there's more to the story for NIKE? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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