Nike Inc (NKE) Stock Defies Logic: Shares Skyrocket Even After Earnings Plummet

Wall Street’s latest magic trick? Nike just pulled a rabbit out of its financial hat.

Despite reporting a gut-punch earnings drop, NKE shares surged—proving once again that stock prices and fundamentals are in an open relationship.

The bullish case: smoke, mirrors, or just hype?

Investors shrugged off the numbers, betting on Nike’s brand power to bounce back. Because nothing says 'rational market' like ignoring double-digit profit declines.

Short squeeze or long-term faith?

Either way, the market’s voting with its wallet—and apparently, it’s wearing Air Jordans.

Closing thought: Maybe earnings reports are just elaborate performance art for institutional investors.

TLDR

• Nike stock surged 15% despite Q4 revenue dropping 12% to $11.1 billion as CEO Elliott Hill said the worst is behind the company
• Truist raised Nike’s price target to $85 from $73, citing faster turnaround progress than expected with inventory cleanup and rising holiday orders
• Nike faces $1 billion in tariff costs but plans to mitigate through supply chain shifts, price increases, and cost reductions
• CEO Hill is implementing a “Win Now” action plan focusing on innovation, rebuilding wholesale partnerships, and premium positioning
• Earnings per share plunged 86% to $0.14 but beat analyst expectations by a penny

Nike stock rocketed 15% higher on Friday after the company delivered better-than-expected fourth quarter results. The surge came despite revenue falling 12% and massive tariff headwinds looming ahead.

CEO Elliott Hill told analysts the company’s turnaround efforts are gaining traction. He said the worst of Nike’s struggles appear to be in the rearview mirror.

The athletic giant reported Q4 revenue of $11.1 billion, down 12% year-over-year. This still beat Wall Street expectations of $10.7 billion. Nike brand revenue specifically dropped 11% to $10.8 billion.

Earnings per share crashed 86% to just 14 cents. However, this topped analyst forecasts by a penny. The massive earnings decline reflects heavy discounting to clear excess inventory.

Nike Direct revenue plummeted 14% to $4.7 billion. Digital sales collapsed 26% as the company repositions its apps as premium destinations. Wholesale revenue fell 9% to $6.4 billion.

China remained a major weakness with revenue sinking 21% to $1.5 billion. Nike has been heavily discounting products in China to reset inventory levels.

North America revenue dipped 11% to $4.7 billion. Footwear sales fell 13% while apparel dropped 7%. Europe, Middle East and Africa sales declined 9%.

Turnaround Strategy Takes Shape

Hill has been implementing his “Win Now” action plan since taking over as CEO. The strategy focuses on returning Nike to its innovation roots after years of neglect under previous leadership.

The company reorganized around sports-specific innovation across Nike, Jordan, and Converse brands. Early wins include the Vomero 18 running shoe becoming a $100 million franchise within 90 days of launch.

Nike is also rebuilding wholesale relationships that were damaged under former CEO John Donahoe. The company recently announced a new partnership with Amazon to carry select Nike products.

The brand is implementing sharper marketplace segmentation. Lower-priced products will be available at retailers like Kohl’s. Premium items with the latest technology will remain exclusive to Nike stores and apps.

Tariff Challenges Ahead

Nike faces a major headwind from tariffs on Chinese imports. CFO Matt Friend estimated the impact at $1 billion in additional costs.

The company plans to “fully mitigate” tariff costs through several measures. Nike will reduce U.S. imports of China-made products from 16% to high single digits by fiscal 2026.

Price increases starting in the fall will help offset costs. The company will also reduce corporate expenses to maintain margins.

Friend said Nike will reallocate Chinese supply to other countries. However, China manufacturing remains important to the global supply base.

Gross margins fell 440 basis points to 40.3% in Q4 due to heavy discounting. The company expects margins to decline further in fiscal 2026, with greater impact in the first half.

President Trump’s administration reached a trade deal with China but 30% tariffs remain in place.

Goldman Sachs analysts said they were “incrementally encouraged” by Nike’s results and Hill’s strategic plans. Truist raised its price target to $85 from $73, keeping a Buy rating.

The analyst firm noted that turnaround efforts are yielding faster improvements than expected. Channel inventories are getting cleaned up and holiday orderbooks are rising year-over-year.

However, some skeptics remain. GlobalData’s Neil Saunders said Nike “continues to fall out of favor with consumers” despite beating expectations.

The stock trades at about 39 times forward earnings due to depressed profits. If Hill can restore earnings to previous levels around $3.73, the valuation WOULD drop below 20 times earnings.

Nike currently faces an estimated $1 billion in tariff costs while working to rebuild its innovation pipeline and wholesale partnerships under new CEO Elliott Hill.