It's the start of a new year. The economy is on solid footing, and the stock market is roaring higher. Some businesses are being left behind, though. In fact, there's a longtime industry leader that has struggled to grow revenue and profits recently. And the shares are trading 60% off their all-time high from over three years ago.

Nonetheless, I think patient investors should seriously consider buying this S&P 500 stock with $1,000 in 2025 and holding for five years or longer.

Management missteps

Based on recent trends, it's certainly difficult for anyone to be even remotely optimistic about what's going on at Nike (NKE 3.29%). The company has dominated the global sportswear market for decades, but it has hit a major rough patch. Revenue was flat in fiscal 2024 (ended May 31) and down 9% in the first six months of fiscal 2025 (ended Nov. 30).

I think the blame falls on the previous management team. The former CEO, John Donahoe, focused intensely on bolstering Nike's e-commerce presence. To his credit, this made total sense during the pandemic due to a temporary change in shopping behavior. But people have turned back to in-store shopping, where the company's presence has weakened.

Donahoe was also leaning heavily into legacy franchise sneakers due to heightened demand. Ultimately, the cool factor took a hit, leading to excessive promotional activity.

Brighter days ahead

The market hates uncertainty. And Nike's situation appears very uncertain right now. This explains the stock's poor performance. However, there are reasons for investors to become more bullish about the company and the direction it's headed in.

Nike brought in Elliott Hill to be its new CEO. He spent his time at the sportswear company, going from intern to executive before retiring in 2020. There might be no one on Earth who knows the ins and outs of this business quite like him. His initial priorities are to lean back into wholesale channels while also selling off outdated inventory.

A refreshed strategic focus is obviously the first thing Nike needs. It's encouraging to know that the ability to fix missteps of prior years is totally within its control.

Plus, the brand still has tremendous value. Nike is one of the world's most recognizable consumer products companies, due in large part to a worldwide presence, high visibility with professional athlete endorsements, and incredible marketing prowess. This is a sustainable, competitive advantage that leads to a strong return on invested capital.

The company is in an enviable financial position, too. It consistently generates positive net income and free cash flow, allowing the business to return capital to shareholders in the form of dividends and buybacks.

This means its debt burden of $9 billion isn't anything to worry about today. Nike also has almost $10 billion of cash, equivalents, and short-term investments on the balance sheet, and it earns interest income during each quarter.

Low expectations

The pessimism surrounding Nike is hard to ignore. But for patient investors with conviction, the opportunity is ripe. The stock trades at a price-to-earnings ratio of 21.9. That's not only cheaper than the S&P 500, but it's also substantially lower than Nike's historical 10-year average of 37.4.

It's not all rainbows and butterflies, though. The apparel and footwear markets are extremely competitive, and tastes change all the time. Nike must always ensure that it's selling products that excite consumers, while meeting these shoppers where they are. The new leadership team understands that this is of the utmost importance.

I believe the shares' discounted valuation makes up for the unrelenting competitive forces. Investors who can buy $1,000 worth of stock and hold for the long term are in a position to be rewarded.