Question: How would you react if you held Nike (NYSE: NKE) and its value declined by 40% or more in the coming months? While this may sound extreme, it has occurred before and could potentially happen again. Nike stock has come under pressure this year, with the company’s shares down about 22% since early January, compared to a 10% drop in the S&P 500 over the same period. For Q3 (ended Feb 28, 2025), revenue declined 9% year-over-year to $11.3 billion, mainly due to a 17% drop in China sales. Moreover, earnings per share fell 30% year-over-year to 54 cents. The recent “reciprocal tariffs” imposed by President Trump have further worsened the situation, spurring a market sell-off and raising concerns around inflation and economic growth. This has added more obstacles to Nike’s ongoing turnaround strategy.
Here’s the point: During economic downturns, Nike stock has historically suffered steep losses. For instance, NKE stock shed roughly 40% in a few quarters back in 2020 and experienced a peak-to-trough decline of about 53% during the 2022 inflationary period, underperforming the S&P 500. This raises a key question: could Nike shares plunge to around $32 if a similar scenario unfolds again? Individual stocks typically display more volatility than diversified portfolios. Investors seeking steadier growth might explore the High-Quality portfolio, which has outperformed the S&P 500 with returns exceeding 91% since inception.
Why Is It Relevant Now?
On Wednesday, April 9, President Trump introduced a 90-day delay on reciprocal tariffs for all countries except China, applying a 10% baseline rate while implementing a steep 125% tariff on Beijing. This announcement helped spark a global market recovery following a week of losses, as investors welcomed the narrowing of trade tensions to a U.S.-China conflict. In retaliation, China raised its planned 34% tariff on U.S. imports to 84%, intensifying the standoff. This escalation could fuel growing anti-American sentiment in China, where authorities are reportedly encouraging consumers to avoid U.S. goods.
Given this context, Nike’s risk exposure is substantial. About 24% of Nike’s suppliers and manufacturers are located in China, making the company highly susceptible to ongoing trade tensions. Additionally, with close to 50% of its shoes and about 30% of its apparel produced in Vietnam, any uptick in tariffs could significantly raise costs and disrupt the supply chain. If Nike fails to mitigate these expenses through price increases or supplier negotiations, profit margins could be adversely impacted.
How resilient is NKE stock during a downturn?
NKE stock has underperformed the S&P 500 during some recent downturns. While investors hope for a soft landing in the U.S. economy, how severe could things get in the event of another recession? Our dashboard How Low Can Stocks Go During A Market Crash details how major stocks performed during the last six market crashes.
Inflation Shock (2022)
• NKE stock dropped 53.2% from $177.51 on Nov 5, 2021, to $83.12 on Sep 30, 2022, compared to a 25.4% decline in the S&P 500
• The stock has not yet recovered to its pre-crisis high
• Its highest point since was $128.85 on Jan 13, 2023, and it currently trades near $55
Covid Pandemic (2020)
• NKE stock fell 40.0% from $104.58 on Jan 21, 2020, to $62.80 on Mar 23, 2020, vs. a 33.9% drop for the S&P 500
• The stock recovered fully by Aug 10, 2020
Global Financial Crisis (2008)
• NKE stock dropped 45.0% from $35.03 on Jun 5, 2008, to $19.29 on Mar 9, 2009, vs. a 56.8% drop for the S&P 500
• The stock fully recovered by Mar 15, 2010
Valuation
At approximately $54 per share, Nike is trading at around 26 times consensus 2025 earnings, which is slightly below its three-year average of 30x. Analysts have set a price target of $78 for the stock, suggesting nearly 43% upside potential. However, Nike expects Q4 2025 sales to drop in the low-to-mid teens range and anticipates a 4-5 percentage point contraction in gross margin due to efforts to offload excess and underperforming inventory—a trend that may persist into fiscal 2026. Full-year revenue is forecast to decline 11% in FY’25 and 1% in FY’26. The outcome of Nike’s turnaround strategy will determine whether it can weather the impact of elevated tariffs.
With growth concerns and broader economic uncertainty looming, consider this: Will you hold on to your Nike shares if they fall to $40, $30, or lower? Holding a falling stock is never easy. Trefis works with Empirical Asset Management—a Boston-based wealth firm—whose portfolio strategies delivered gains even during the 2008-09 crash when the S&P 500 dropped over 40%. Empirical uses the Trefis HQ Portfolio to offer higher returns with lower risk than the benchmark index, providing a smoother investment experience as illustrated in the HQ Portfolio performance metrics.
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