There's no doubt that Nike (NKE 1.31%) is one of the most well-known consumer businesses in the world. Not only am I willing to bet that readers have seen one of their favorite athletes wearing a Nike product on TV or at a sporting event, but they most likely have some Nike shoes or clothing in their closets. That's indicative of just how dominant this company has become. 

But with its shares down 30% in 2022, investors are probably thinking hard about what to do with their Nike holdings. Maybe you'll have more clarity after understanding the bullish and bearish arguments for this top apparel stock. 

Nike bulls 

As I touched on in the intro to this article, Nike possesses one of the strongest consumer brands out there. According to Kantar, it was ranked as the top apparel brand in the world, having a stronger brand value than industry leaders like Tesla and Coca-Cola. As far as recognition goes, it's safe to say that Nike is among the best, providing in-demand apparel and footwear that possess a rare coolness factor and a winning mentality that's associated with them. 

The brand is being bolstered by Nike's digital investments. As part of its Consumer Direct Acceleration initiative, the company has focused relentlessly on increasing product innovation, while providing shoppers with a seamless e-commerce and technology experience. Today, Nike counts an impressive 160 million active members in its digital ecosystem. 

Driving deeper consumer engagement is a powerful position to be in as it translates to business success. Nike has had no trouble increasing revenue over the years, a trend that is set to continue. Management expects fiscal 2023 (ending May 31 of this year) to rise low double-digit percentages compared to the prior-year period. 

While China has historically been Nike's fastest-growing region, pandemic-related lockdowns in the country have seriously hurt business recently. Revenue in Greater China fell 3% in the latest fiscal quarter (ended Nov. 30), the only geography posting a decline. However, this should prove to be a temporary issue. 

"When we look at the underlying macro drivers long term of the consumer interest in sport health in Greater China, we continue to view it as a growth driver for our business long term," CFO Matt Friend mentioned on the second-quarter 2023 earnings call. 

Nike's business has durability as it has been operating successfully for decades. The momentum should continue in the year ahead. 

Nike bears 

In the recent past, Nike has been dealing with a surge in its inventory levels. During the fiscal 2023 first and second quarters, inventory shot up 44% and 43%, respectively, versus the prior-year periods. Today, Nike has $9.3 billion in merchandise sitting on its balance sheet, a troublesome sign given the weakening macro environment.

To sell its products, Nike is being forced to implement a greater number of price markdowns than usual. In fact, the company's Q2 2023 gross margin of 42.9% was negatively affected by heightened promotional activity. This type of pricing activity doesn't bode well for the brand's strength, which is its most important competitive advantage. 

Additionally, general macro concerns can be a major cause of worry for a consumer discretionary enterprise like Nike. That's because its shoes and clothing are on the premium end of the spectrum, and people can simply stop buying these items when their wallets are being pinched. High inflation, coupled with rising interest rates, might discourage shoppers from spending as they would in more robust economic times. This could pressure sales trends in the quarters ahead. 

A final bear argument points to Nike's future growth potential. Wall Street consensus analyst estimates call for sales to increase at a compound annual rate of 8.1% between fiscal 2022 and fiscal 2027. While this is a slight uptick from the trailing five-year growth rate, it probably isn't enough to please growth-oriented investors. 

Furthermore, at a current price-to-earnings multiple of 36, Nike isn't able to satisfy value investors either. This means that there likely isn't an opportunity to achieve outsized returns for shareholders over the next few years.