QS Research · Michael Burry's Scion Capital analyst template · 2006
NIKE, Inc. (NKE)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +1% · downside -29% · upside +27%
I keep section 13's TTM 8/31/26 base; no cycle-average normalization is used. The market is not missing the operating collapse—NKE already trades at 7.4x TTM EBITDA and 10.7x TTM P/E—but the TTM P/E carries the Q4 FY26 IEEPA tariff-recovery benefit and FCF of $2.10B is below dividends of $2.43B, so the 6.4% FCF yield is not clean. At 8.0x TTM EBITDA: 8.0 x $4.60B = $36.8B EV; less $7.89B debt, plus $6.90B cash, less $3.09B leases = $32.7B equity, or $38.25/share; an 11x $3.09B earnings cross-check is $39.74/share, so the blended base is ~$39, about +1%. Downside at 6.0x EBITDA is ~$27.5 (-29%) and upside at 10.0x EBITDA is ~$49.0 (+27%), so the long rule fails on the -25% downside test and the short rule fails on the +25% upside test. That makes NKE a watch, not a pass: the franchise is interesting, but the price is not yet at the ~5.0x EBITDA level that would make the odds asymmetric.
Key numbers
- Share price: $38.59
- Market cap: $33.01B
- Latest financial period: TTM to Aug 31, 2026
- Revenue (TTM): $45.89B
- EV / EBITDA (TTM): 7.4x
- P/E (TTM): 10.7x
- Price / book: 2.17x
The 15 boxes
- ✓ 1. Long-form business notes
NIKE designs, markets and sells athletic footwear, apparel and equipment, selling both through its own NIKE Direct stores and digital platforms and through wholesale accounts, distributors and licensees, with virtually all product made by independent contractors outside the U.S. (S23). Scale has stalled: revenue peaked at $51.36B in FY2024, fell to $46.31B in FY2025 and was $46.40B in FY2026, versus $44.54B in FY2021 (S24). Profitability fell much harder than sales — FY2026 gross profit of $19.91B is essentially the FY2021 level ($19.96B), pre-tax income is $3.90B versus $6.70B in FY2024, and operating cash flow is $2.87B versus $7.43B in FY2024 (S24). The current 10-K flags concentrated contract manufacturing, trade/tariff exposure, a 2025 credit-rating downgrade and securities litigation, while Swoosh, LLC still holds roughly 79% of Class A stock (S22).
- ✓ 2. Competitive advantage
The sources support a durable but brand-and-IP-based advantage rather than a cost advantage: NIKE calls itself the largest seller of athletic footwear and apparel in the world, holds the NIKE and Swoosh marks in over 190 jurisdictions, and names 11 branded rivals as competitors on product, consumer connection and distribution. The margin history does not confirm pricing power: gross margin fell from 46.0% in FY2022 to 42.9% in FY2026 and pre-tax income fell from $6.70B in FY2024 to $3.88B in FY2025 and $3.90B in FY2026. Cash-based earning power also weakened, with operating cash flow down to $2.87B in FY2026 from $7.43B in FY2024.
- ✓ 3. 10-Q takeaways
Q1 FY2027 (quarter ended Aug 31, 2026) revenue was $11.213B, down 4% reported and 5% currency-neutral, with NIKE Direct down 9% currency-neutral and Greater China down 26% currency-neutral. Gross margin rose 60 bps to 42.8%, but net income fell 2% to $712M and diluted EPS was $0.48. Inventories were $7.8B, up 5% from May 31, 2026; operating cash flow was $135M vs $222M, and no shares were repurchased in the quarter while $0.6B was returned via dividends. The October 2026 Pace program expects ~$1.0B pre-tax charges but ~$2.5B cumulative savings through FY2031; the 10-Q flags NIKE Sportswear/Jordan and Greater China actions extending beyond FY2027.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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