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I’ve had my eye on Nike (NKE) for a year and a half now, initiating a starter position 9 months ago, and waiting for a moment to go bigger. This is it.

First let’s talk about the quarter. It was bad. Really bad. Currency neutral revenue was -7%. Gross margin decreased 3.3% to 41.5%. The combination resulted in a 45% decline in EPS compared to the year ago period. And it gets worse….

Guidance for the current quarter (4QFY25) was terrible. While they haven’t put the conference call transcript up on the website yet for some reason, according to Wasteland Capital and Jeff Macke on Twitter Revenue is expected to be down mid-teens (!!!) and Gross Margin 400 to 500 basis points. It doesn’t get any worse than that. As Wasteland tweeted, these are “dogshit numbers” with “ZERO signs of a turnaround”.

So everybody is going to dump NKE at the open this morning. It’s already down 58% from its November 2021 highs. In the above linked tweet, Macke wrote: “I can’t get far enough away from this company.”

Here’s the thing: NKE has historically been a great company and it still makes high quality products as far as I can tell. They are going through a rough patch but I doubt this is the end of their leadership in sneakers and sports apparel.

NKE earned $3.73 in FY24, $3.23 in FY23, $3.75 in FY22 and $3.56 in FY21. FY25 is going to “dogshit”. Through the first three quarters, EPS is -26% to $2.02.

NKE is currently -7% in the premarket at ~$67. If EPS can get back up towards $4/share in the next few years, you’re paying less than 20x. That’s a price I’m willing to pay for perhaps the greatest athletic company in history.

I could be wrong. There is no certainty in this game. But If I’m right that this is the “moment of maximum pessimism” and NKE will eventually right the ship, shares are likely to be significantly higher in 3-5 years and we’ll look back at today as a tremendous buying opportunity.

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