Just when you thought things couldn’t get any worse for Nike (NYSE:NKE) stock when it flirted with multi-year lows, the footwear juggernaut recently clocked in an abysmal quarter that sank its stock to even lower multi-year depths. Indeed, Nike may have been caught flat-footed as its smaller, fast-rising footwear rivals picked up the pace.

Of course, the inflation-hit economic environment may push some consumers to trade down to lower-cost alternatives. However, Nike’s managers bear responsibility as NKE stock struggles to escape a historic rut. Nonetheless, despite the negative momentum and challenges that lie ahead, I remain bullish on NKE.

Dip-buyers sitting on the fence should probably “just do it” if they seek exposure to one of the Dow Jones Industrial Average’s bluest blue-chip stocks while hovering near six-year lows. At $72 and change per share, NKE stock goes for 19.4 times trailing price-to-earnings (P/E).

Such a multiple in the high teens is not typical for a firm that has one of the most iconic premier brands on Earth. When discretionary spending is good, and sneakers are flying off shelves, it’s not out of the ordinary to see shares of NKE go for well north of the 30 times trailing P/E mark. Until recently, Nike shares have hovered around that range.

At today’s historically depressed multiple, Nike seems like a bargain, even if you don’t think the coming Paris Olympics will act as a catalyst to help the firm return to greatness. Personally, I’m skeptical that the Olympic games are the magic solution to NKE stock’s woes. Perhaps Nike’s biggest concern lies with its fast-moving rivals rather than the sub-par environment of discretionary apparel.

Nike’s Been Outpaced By Rivals. It Can and Probably Will Pick up the Pace Again

Companies like Swiss’ On Holdings (NASDAQ:ONON) are the sneaker newcomers to the scene, and their presence has been felt by firms like Nike. While ONON stock has surged more than 117% in just the last two years, as Nike fell further into its funk, I’d be more inclined to bet on a turning of the tides.

Indeed, many North American consumers, including Nike customers, have likely been exposed to On sneakers for the first time in the last two or three years. And those who were enticed have probably bought a pair for themselves by now. Before you hit the sell button on Nike stock for shares of ONON, however, it’s unclear whether the “share taking” we’ve witnessed is sustainable.

The big question is whether these customers will stick with On, either due to performance or to make a fashion statement, or if they’ll return to leading brands like Nike. If On can retain the customers it won over, perhaps Nike’s problems could mount even further. If it can’t, NKE stock’s sell-off could prove severely overdone, and a relief rally may be warranted at some point in the distant future.

At the end of the day, trends in athletic apparel can be rather fickle. A bit of share-taking in any given season is no cause for serious concern. Why? The direction and magnitude of fashion trend shifts can change rapidly and unpredictably.

On Holdings may have the novelty factor as the new brand on the block. However, it’s a stretch to think On will sustain its high double-digit growth rate en route to becoming the new Nike. Sure, On may be innovating better than Nike, with a better pricing strategy. However, thinking that Nike can’t catch up to rivals like On would be heavily discounting the power of a brand built on the back of giants (think Michael Jordan) over the span of decades.

Nike: Out of Fashion Today But Setting the Stage for a Comeback

Personally, I’d be more inclined to go for Nike stock over On, even after a dismal quarter that wiped out around 20% in a single day. Nike has a strong brand and a rediscovered willingness to innovate. Also, I think the past few years have been a lesson learned for the sneaker giant. It’s never okay to be complacent by allowing rivals to overtake you on the race track.

As Nike cuts $2 billion (or so) in costs over the next three years while driving innovation with initiatives like its Bowerman Footwear Lab, I think Nike is positioning itself to regain the lead once the economy improves. Consumers will be ready to “trade up” to those expensive new releases (like Air Max DN or Alpha Fly 3) and the timeless classics (like Jordan, Air Force 1, and Air Max).

In the meantime, perhaps its planned new line of sub-$100 sneakers and discounting could be the way to go as inflation and discretionary retail headwinds mount.

In any case, it makes more sense to go for the lagging apparel play (NKE is down 32.7% year-to-date) with a strong brand than a lagging technology firm so far behind the competition that it is virtually impossible to catch up. When it comes to tech, innovation matters far more than brand. In apparel, I’d argue the reverse is true. After all, you can only innovate so much when it comes to shirts and sneakers.

Is NKE Stock a Buy, According to Analysts?

On TipRanks, NKE stock comes in as a Moderate Buy. Out of 32 analyst ratings, there are 13 Buys, 17 Holds, and two Sell recommendations. The average NKE stock price target is $92.48, implying upside potential of 27.5%. Analyst price targets range from a low of $67.00 per share to a high of $120.00 per share.

The Takeaway

When it comes to the most recognized brands worldwide, the Nike swoosh has to be right up there. When you see that swoosh, you should think of style, athletic performance, and even nostalgia. The power of this brand won’t dissipate permanently over the span of a few years.

As Nike’s management looks to take action (cost cuts, innovative projects), I’d be more inclined to bet on Nike over its higher-momentum rivals. Perhaps the firm could go back into fashion as quickly as it went out at the hands of new brands like On. Either way, it’s hard not to view NKE stock as a great value option if you believe in the brand and think the economy will be in for a soft landing.