Nike’s Amazon Expansion Could Signal a Turnaround in 2025

Key Points

• Nike stock is showing signs of potential outperformance in the coming months and quarters after a Liberation Day reversal, beating the S&P 500.
• With a new development in collaboration with Amazon's platform, margins could improve to drive EPS higher.
• Markets are still willing to pay a premium for Nike stock for a reason, and this future growth could be one.

There has been a significant pullback in the retail sector recently, both in terms of stock prices and the United States economy, marked by slower consumer and business spending. The primary reason for this behavior and dynamic is that the recent trade tariffs implemented by President Trump may have spooked some in the sector, as it is heavily reliant on imports from other nations.

Most of these nations, such as China and Vietnam, are responsible for supplying the United States with its clothing and retail materials, thereby threatening the profit margins and cost dynamics currently seen in the space. In this regard, there is one specific name that could prove to be the opportunity of the cycle, where the company’s leadership is already showing signs of maneuvering this current uncertainty.

The stock in question is sportswear and shoe behemoth Nike Inc. NYSE: NKE, widely known for its exposure to Taiwan, Vietnam, and China. The interesting theme in this stock is that its price action showed little change when the foundational tariffs were announced during Trump's Liberation Day in April. This means that most of the worst-case scenarios had likely already been priced into the company, creating the opportunity investors need today.

Price Action: A Subtle Sign of Confidence

While both the S&P 500 index and Nike stock are back at the same levels they were at during Liberation Day, how they got there is important to note for Nike investors (or those considering a purchase). Nike stock has outperformed the S&P 500 index by roughly 5% since that heavy sell-off day, setting the stage for bulls.

Why this stock recovered more quickly and aggressively than the broader market is up for debate, but investors could safely start thinking that the stock’s previous discount might have already set the tone for a more aggressive recovery and made it more attractive in terms of risk-to-reward ratios.

Considering that Nike has now fallen to 63% of its 52-week high, the stock is in a deep bear market according to Wall Street’s definition (a 20% decline from 52-week highs). The encouraging fact is that Nike had been in a bear market long before the Liberation Day tariffs came into effect; here’s why that matters.

When the uncertainty and volatility eventually subside, Nike could be first in line to deliver a better recovery, as it already had shown since Liberation Day compared to the S&P 500 index. However, some investors didn’t stick around to see the stock regain its former glory.

Billionaire investor Bill Ackman decided to end his battle with Nike stock, dumping his position recently after having held it for a few quarters, which seemed like the perfect value play at the time. The interesting thing is that Ackman ended up buying a new stake in shares of Amazon.com Inc. NASDAQ: AMZN.

Coincidence? Nike’s New Move in Amazon Collaboration

Perhaps Ackman decided to stay invested in Nike in other ways, which appears to be the case, as the timing of his position shift and a new announcement from Nike seemed to overlap.

In response to the new world of tariffs and cost uncertainty, Nike returned to collaboration mode with Amazon, becoming a direct vendor on the platform and eliminating a range of additional costs by bypassing the middleman and associated overhead and logistics expenses.

The financial impact is not the only one that could occur in Nike's business, as control over the consumer experience and quality of delivery could also be positively affected (not to mention the simplification of maintaining control over its inventory).

These effects on financials will likely push current earnings per share (EPS) forecasts higher, seeing that better margins due to lower costs could give Nike a chance to report better and higher EPS moving forward. Even before this change is implemented, Wall Street analysts now expect up to $0.60 in EPS for the fourth quarter of 2025.

Compared to Nike's most recently reported EPS of $0.54, this forecast would call for a net growth rate of up to 11% by the end of the year. As investors know, where EPS growth goes, so does the stock price, which may justify the stock trading at a price-to-earnings (P/E) premium of 18.9x compared to the rest of the retail sector's average of 15.2x.

This premium is also reflected in the price-to-book (P/B) ratio, where Nike commands a 6.4x multiple compared to the sector's average of only 4.8x today. Of course, some investors might still consider this expensive, failing to realize that the market will always pay a premium for stocks it believes can outperform its peer group and the broader market as well.