Comparing Nike and Apple: A Tale of Two Stocks in Today’s Market
Nike (NYSE: NKE) and Apple (NASDAQ: AAPL) are highly regarded choices for conservative investors looking for reliable, blue chip stocks. Both companies represent iconic American brands, wield substantial pricing power, and dominate their industries.
However, Nike’s stock price has plummeted by 50% over the last three years, while Apple’s stock has gained over 30%. This raises the question: why did Apple outperform Nike so significantly, and is Apple still the better investment today?
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Reasons Behind Nike’s Stock Decline
Nike’s revenue increased by 5% in fiscal 2022 (ending May 2022) and saw a 10% rise in fiscal 2023. Yet, during fiscal 2024, the company’s revenue stagnated.
The Nike Direct segment, which encompasses both e-commerce and physical stores, experienced only a 1% growth in revenue, largely due to weak digital sales compared to the improved performance of its physical stores. This slowdown, particularly in North America, overshadowed stronger sales in China and other global markets.
The situation intensified in the first half of fiscal 2025. Revenue for Nike Direct plummeted by double digits, leading to an overall 9% decline in total revenue year over year. For the entire fiscal year, analysts anticipate that Nike’s revenue and adjusted EPS will drop by 10% and 48%, respectively.
To turn things around, Nike is focusing on rebuilding relationships with wholesale retailers and diversifying its business beyond direct sales. The company aims to increase the sales of premium full-price products to counterbalance markdowns while boosting investment in new products and marketing. Despite these strategies, significant profit improvements may be challenging unless revenue growth stabilizes amidst potential tariff disputes between the U.S. and China.
While conditions may improve for Nike in fiscal 2026 if these issues ease, its stock currently appears overpriced at 29 times forward earnings. Additionally, its forward dividend yield of 2.1% is unlikely to entice income-focused investors.
Apple’s Stock Resilience Explained
Apple continues to generate over half of its revenue from iPhone sales, making its growth inherently tied to the overall smartphone market. In response to its reliance on iPhones, Apple has expanded its services, accumulating over 1 billion paid subscriptions for offerings like Apple Music, Apple TV+, and iCloud.
Apple’s revenue grew by 8% in fiscal 2022 (ending September 2022) but saw a decline of 3% in fiscal 2023 due to sluggish sales of iPhones, Macs, and iPads, countered by strong service growth. In fiscal 2024, the revenue bounced back with a growth of 2%, led by renewed iPhone sales. For fiscal 2025, analysts project a revenue increase of 5% and 9%, respectively, despite hardware-related tariff risks, antitrust challenges in services, and hurdles in launching new products.
Nonetheless, Apple remains extremely profitable, ending its latest quarter with $141 billion in cash and marketable securities. This financial strength empowers Apple to invest, acquire, buy back shares, and distribute dividends, making it a safe option in a volatile market. The company’s focus on expanding generative AI services also aims to enhance its ecosystem and retain more customers.
Apple’s stock is not cheap either, priced at 31 times forward earnings with a forward dividend yield of only 0.4%. However, it faces fewer immediate existential threats compared to Nike, despite both companies being vulnerable to increased tariffs.
Which Stock Is the Better Investment?
While the temptation to buy Nike’s stock after its significant drop may linger, the challenges it faces are too substantial. On the other hand, while Apple’s stock may not experience meteoric rises in the short term, it is positioned to deliver better returns than Nike for the foreseeable future.
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Leo Sun has positions in Apple. The Motley Fool holds positions in and recommends Apple and Nike. For more information, see their disclosure policy.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Nasdaq, Inc.