With Nike Stock Below $50, Is This a Buy-the-Dip Moment?
Key Points
Nike's fiscal third-quarter earnings per share plunged 35% year over year as tariffs weighed heavily on gross margins.
The company's wholesale revenue remained a bright spot, climbing 5% year over year.
With a dividend yield topping 3% and a massive cash hoard, the stock arguably offers a margin of safety for patient investors.
Shares of athletic footwear and apparel giant Nike (NYSE: NKE) were already off to a tough start in 2026. And the pain intensified on Tuesday afternoon, when the company reported its fiscal third-quarter results. Challenged sales in China and a weak outlook for the current quarter sent shares plummeting, putting the stock below $50 -- far below its all-time high of more than $165 in late 2021.
With the stock down so sharply, investors might be wondering if this iconic consumer brand is finally cheap enough to buy.
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Nike's challenges
Nike's fiscal third quarter (a period wrapping up on Feb. 28, 2026) shows a business that is still very much in the middle of a turnaround under CEO Elliott Hill.
Sales were flat year over year, and Nike's gross margin narrowed by 130 basis points to 40.2%, primarily due to higher North American tariffs. This margin compression, combined with a higher tax rate, led to a 35% year-over-year decline in net income to $520 million. And earnings per share similarly fell 35% to $0.35.
Further, the company's direct-to-consumer channel is struggling. Nike Direct revenues fell 4% year over year to $4.5 billion, and sales at the company's Converse brand plummeted 35%. Management also pointed to continued sluggishness in the important China market -- a stark contrast to the surging sales competitors like Lululemon Athletica (NASDAQ: LULU) are experiencing in that region.
And the company's outlook was especially disappointing, with the company guiding for fourth-quarter revenue to fall 2% to 4% year over year and Greater China remaining a weakness, with management guiding for sales in the market to decline about 20% year over year.
Management's expectations for a 20% decline in Greater China is startling, given that sales in the market fell 10% in fiscal Q3. The sharper decline reflects "reduced sell-in" as the company "accelerated actions to clean up the marketplace," explained Nike chief financial officer Matt Friend in the company's fiscal third-quarter earnings call.
Wholesale growth and a pristine balance sheet
Despite clear challenges, there are also signs that Nike's business is stabilizing.
Most notably, the company's wholesale revenues climbed 5% year over year to $6.5 billion, extending strong momentum in wholesale that only recently resurfaced. After several years of prioritizing its direct-to-consumer channels at the expense of its retail partners, Nike's renewed focus on the wholesale channel appears to be paying off and driving top-line resilience in North America.
In addition, Nike is navigating this transition with an incredibly strong financial foundation. The company ended the quarter with $8.1 billion in cash, short-term investments, and cash equivalents.
This financial strength allows Nike to heavily reward shareholders while they wait for the turnaround to take full effect. The company returned $609 million to shareholders via dividends in the fiscal third quarter. And based on the stock's current price, Nike offers a dividend yield of about 3.4%.
So, is Nike stock a buy? I believe it is.
Of course, there are real risks here. The consumer discretionary environment remains unpredictable, and if tariffs persist or demand in China worsens, Nike's earnings could remain under pressure for longer than investors anticipate. Investors should therefore probably keep any position in the stock relatively small.
But finding a world-class brand with a pristine balance sheet trading at a nine-year low is rare. If CEO Elliott Hill can successfully navigate this portfolio transition and revitalize consumer interest, the stock's severely compressed multiple could end up being a great entry point. For patient investors willing to collect a 3.4% dividend yield while the story plays out, I think Nike stock is a buy on this dip.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. and Nike. The Motley Fool has a disclosure policy.
