The last two and a half years have been tough for Nike (NKE 0.27%) Shareholders. Just when it looks like the stock is on the mend, it manages to make an even lower low. The share price is now 53% below its late 2021 peak and appears to have room to fall further.

However, as the saying goes, it’s darkest before the dawn. Translation: As uncomfortable as it may feel, now is the time to jump into a new investment in Nike. A long-awaited revival of the brand’s strength is brewing; better to be early than late.

Not the Nike products that consumers knew and loved

As a reminder, Nike was doing well before the COVID-19 crisis. The company even thrived during the first half of the pandemic, but it was also a time of change in the sportswear retail industry. Consumers fell in love with competing shoe brands like To and Hoka, supply chain disruptions led to inventory issues, and after several years of solid growth, China became a particularly difficult market. Nike also learned (the hard way) that to complement its direct-to-consumer (DTC) business, it needed the third-party wholesale partners it had previously turned away from.

The company is still healing these wounds. The same goes for investors.

However, there is reason for hope as Nike addresses each of these headwinds individually.

Finally repair what is broken

Take the recent rehiring of Tom Peddie as an example. After 30 years with the company, he retired in 2020. Now he is back as Vice President of Marketplace Partners. His main task will be to find the optimal balance between the company’s wholesale and DTC activities.

In addition, Nike hopes to reignite genuine interest in the brand through improved innovations.

It wouldn’t be fair to say that the company has simply stopped innovating in recent years, but something is clearly missing, even if the fault lies more on the marketing side of the company than on its design side.

That explains why Nike executives mentioned the word “innovation” over 40 times during the fourth-quarter fiscal 2024 conference call in late June, with the context behind each mention suggesting it’s happening more often now. One concrete product that has emerged from the renewed innovation effort is Dynamic Air, which isn’t just a sneaker, but a full platform that enables further creative improvements in air-based foot cushioning. Consumer response to Dynamic Air – and other recent innovations – has been strong.

Image source: Getty Images.

Other improvements are more technical in nature, but no less important.

Take inventory, for example. Nike started fiscal 2023 with nearly $9.7 billion in bloated inventory. Although it took some deep markdowns to get rid of products last year, the company has reduced inventory to a more manageable $7.5 billion. The key to this effort was passing on more goods to third-party sellers.

The 3% year-on-year increase in China sales last quarter was also driven by 15% growth in the wholesale channel. For the full fiscal year 2024, sales in the region increased 4%, reversing the 4% decline from the previous year.

A good choice for aggressive, risk-taking growth investors

Can these developments be seen as a sign that Nike is back on the right track?

Of course, there are no guarantees when investing. If you can take evidence at face value, all of the above should be seen as evidence that Nike is at least capable of recovering – and will likely continue to do so. The company’s leadership has recognized the problems and is taking decisive action to resolve them. And finally, the management team is also fortunate to be working with one of the most recognized brand names in the world.

Data source: StockAnalysis.com. Chart by author. Note that Nike’s fiscal year 2025 began in June.

Even if you are fairly optimistic about the company’s turnaround, this is not an ideal fundamental pick to have an outsized position in your portfolio. It still carries above-average risk and will almost certainly remain volatile.

Although the stock has more than halved from its all-time high, the upside still far outweighs the downside. Nike is a solid choice for the growth portion of a portfolio.