Bill Ackman Investing in Nike Stock: 3 Things Investors Need to Know

Nike (NYSE:NKE) is by far America’s largest footwear and apparel company. The brand has transcended its origins in sports equipment and become a brand of choice for loyal fans around the world. However, this has not stopped the company from coming under serious business pressure in recent years. She made some missteps, and the macroeconomic environment didn’t help.

Hedge fund manager Bill Ackman, who runs Pershing Square Capital and is known for his activist positions, recently opened a large position in Nike. Ackman focuses on a few stocks, and before adding Nike stock to his portfolio in the second quarter, his portfolio had only seven stocks. By the end of the third quarter, that number had risen to 11. And during that period, he increased his stake in Nike by 436%, taking it from its smallest position, just 2.2% of the total, at 11%, more significant.

Nike’s stock price is down about 30% since the start of the year, but there are plenty of reasons to believe it can rebound, making this seem like a clear opportunity. It trades at a cheap P/E ratio of 22, which could attract value investors. If you think you might be interested in following Ackman to Nike, consider these three things before hitting the “buy” button.

1. The new CEO has a lot to repair

Things got really bad for Nike during its first fiscal quarter 2025, which ended on August 31. Sales fell 10% year over year and sales in its Nike Direct segment – ​​its direct-to-consumer channels – plunged 13%. Earnings per share were down 26%.

Several things have happened over the past few years. Notably, Nike has removed its products from the shelves of many of its longtime retail partners to focus on its direct-to-consumer operations. It seemed like a good idea: scaling back its wholesale operations was supposed to help it build more customer loyalty and build its brand presence. It also allowed the company to reduce costs and exercise more control.

Inflation and high interest rates were external factors that also impacted its performance.

However, the downside to this strategy was that Nike gear was not available in many stores after the social distancing phase of the pandemic receded and customers returned to shopping in physical stores. The focus on restructuring has also diverted attention and resources from the innovation pipeline.

Returning to its roots, the company recently named former executive Eliott Hill as CEO. He’s a long-time Nike veteran who management trusts, and he has the experience and deep knowledge of what makes Nike Nike the way to get it back on track.

However, the hole he dug for himself is quite deep. Nike will need to get back to doing what it does best while embracing new trends and consumer behaviors. This could be a big challenge.

2. It is the leading shoe and clothing brand

Leaving aside its woes for a moment, Nike has almost unrivaled brand equity and a lead so wide that it would be impossible for any competitor to surpass it in the short term. This doesn’t guarantee it will be able to generate a rebound or ensure continued success, but no one should rule out Nike just yet.

Consider how it compares to other top sportswear sellers like Adidas, Lululemon Athletica, SkechersAnd On hold. Nike’s revenue is higher than all other sales combined.

NKE Revenue (TTM) data by YCharts.

Now consider its brand value next to that of other clothing companies. Nike is still the number one brand for teens in both clothing and shoes and has been for years, according to the Piper Sandler Survey Take stock with adolescents.

Image source: Statista.

Ackman isn’t taking any chances with an anonymous company here. It invests in a world-class leader in its sector that still has the name, the innovation machine and the culture necessary to maintain its dominant position and return to growth.

3. A rebound can take time, so this is a long-term play