The S&P 500 is the most closely watched benchmark among the investment community because it measures the performance of large and profitable companies based in the U.S. However, it has been getting crushed in the past few days due to uncertainty surrounding tariff announcements.
Some of its constituents have had a rough go, even after a long-term negative trend. As of April 7, this consumer discretionary stock is a whopping 69% off its peak, a record established all the way back in November 2021. To be clear, this business is currently facing some challenges, but the current dip might be too difficult to pass up.
Should you buy shares and hold them for 20 years? Here's what investors need to know.
Losing the winning mentality
Investors are undoubtedly familiar with Nike (NKE 0.28%). The global sportswear icon has long been associated with a winning mentality. However, in recent times, it has done everything except win. Sales continue to be under pressure. In the last four fiscal quarters, the top line has declined on a year-over-year basis. During the third quarter of 2025 (ended Feb. 28), revenue fell 9%. This is not what investors are accustomed to seeing.
Nike's sales trends are very worrying when you consider the rest of the industry. Long-time competitors like Adidas and Puma posted growth in their latest fiscal years. And upstart footwear rivals, like On Holding and Deckers' Hoka, are registering tremendous revenue gains. Nike sticks out like a sore thumb.
The current problems can be traced back to the prior CEO, John Donahoe, who aggressively pushed to grow digital sales while also heavily leaning on classic footwear franchises. Consequently, some of Nike's wholesale retail partners were becoming alienated, and the business wasn't releasing new and exciting designs that drew the attention of shoppers.
New CEO Elliott Hill is trying to change course. The top focus right now is to sell off older inventory while also returning to a culture of product innovation that can drive strong consumer interest.
NYSE: NKE
Key Data Points
Zoom out
It's easy to get caught up in Nike's latest struggles. They are certainly worth keeping an eye on. However, investors should also zoom out and focus on the bigger picture to gain a broad perspective.
At the end of the day, Nike is still one of the world's most recognizable brands. Decades of marketing prowess, high-profile athlete endorsements, partnerships with top sports leagues, and new product releases have allowed the company to resonate strongly with consumers worldwide.
What's more, Nike remains the industry leader. According to Euromonitor, it has top share of the sportswear market, substantially higher than Adidas. Profitability isn't an issue for Nike. In the past decade, its operating margin has averaged 12.2%. Its massive sales base gives the business the scale to leverage its expenses.
Management is keen on returning capital to shareholders in the form of dividends and share buybacks. Combined, these two activities totaled $1.1 billion in Q3.
Tread with caution
Nike is going through a difficult moment in its history, and its valuation reflects that. Shares trade at a price-to-earnings ratio of 18.1, which is the cheapest they've sold for in the past decade. That multiple is also a discount to the S&P 500.
The valuation is certainly compelling. But it's hard to know when growth will be restored and when the brand will be viewed in a better light. The uncertain macro environment, particularly with the tariffs announced that could negatively impact Nike's profitability, also gives reason to be pessimistic.
Only investors who have a lot of patience and are comfortable with more risk should be buying the stock. Perhaps over the next 20 years, Nike can once again be a winner for your portfolio.
