Nike (NKE 0.19%) undoubtedly possesses one of the strongest brands in the world. This has led to a successful enterprise in the sports apparel and footwear industry with a leading market share.

But the shares have disappointed investors in recent times. They dropped 7% in 2023 thanks to the company's ongoing struggles. This performance lagged the broader S&P 500's impressive 24% gain.

As Nike currently sits 43% below its all-time high, is it time to buy this stock hand over fist in 2024?

Easy to be pessimistic

In the most recent fiscal quarter (the second quarter of 2024, ended Nov. 30), Nike reported revenue of $13.4 billion, which was up 0.5% year over year. This was the fourth straight quarter that sales growth decelerated, demonstrating that Nike isn't faring well at a time of heightened economic uncertainty.

"We are seeing indications of more cautious consumer behavior around the world in an uneven macro environment," CFO Matt Friend said on the Q2 2024 earnings call. The softer trends forced management to downgrade full-year guidance, as they now expect revenue to increase by only 1%.

Seeing Nike reduce its revenue outlook is less worrying in light of higher interest rates and inflationary pressures. But the situation is alarming in comparison to a rival like Lululemon, which posted sales growth of 19% in its fiscal 2023 Q3 (ended Oct. 29). This implies that the higher-end consumer is still in a strong position and that Nike's results aren't representative of the overall industry.

Let's turn our attention to the Chinese market. This has historically been Nike's fastest-growing geography. This isn't surprising, as many foreign consumer brands have tapped the Asian nation due to its burgeoning middle class. According to the Brookings Institution, the country's middle class is estimated to have a whopping 1.2 billion people by 2027.

It's worth pointing out, however, that revenue in Greater China last quarter of $1.9 billion was 19% below what it was just three years earlier. From Nike's perspective, the country hasn't fully recovered from the COVID-19 pandemic and the strict lockdown measures that were implemented.

Competition is also getting stiffer. ANTA Sports Products, Nike's biggest rival in China, just posted a double-digit revenue gain, which means it's capturing market share. That's a discouraging sign for Nike.

Chinese consumers are favoring local brands more than international ones. This situation will only make things more difficult for Nike going forward.

Adding insult to injury

Investors can give Nike the benefit of the doubt and view these challenges as short-term in nature. After all, this business has a successful history as an industry leader that spans decades. The thinking is that it will be able to figure things out, leading to a return to the healthy growth we've seen historically.

But the current valuation adds insult to injury. As of Jan. 23, Nike shares trade at a price-to-earnings ratio of 29.8. That represents a 39% premium to the S&P 500. And it's slightly more expensive than a dominant tech business like Alphabet. Which one of these companies would you pay that kind of valuation for? In my opinion, it's the latter, and it's not even close.

Unless investors think Nike's situation will improve sooner rather than later, the stock should be avoided right now.