Motley Fool Money - Can These Three 2025 Losers Turn It Around?

Episode Date: December 29, 2025

We look back to look forward and predict whether three of 2025's biggest disappointments can turn it around in 2026. Can Super Micro Computer (NASDAQ: SMCI), Lululemon (NASDAQ: LULU), and Nike (NYSE: NKE) get back to beating the market? Tom King, Travis Hoium, and Tim Beyers discuss: - How losing faith with auditors cost Supermicro. - Whether fashion trends favor Lululemon. - The 2026 challenges facing Nike CEO Elliott Hill. Companies discussed: SMCI, LULU, NKE Host: Tim Beyers Guests: Tom King, Travis Hoium Producer: Anand Chokkavelu Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Can these three losers become winners in 2026? You're listening. Mottley Fool Money. Welcome, fools. I'm your host, Jim Byers. And with me, are two of my full colleagues, Travis Hoyum, Tom King. Travis, I'm emphasizing you because you haven't been on with me. Usually it's you hosting. Yeah, I'm sitting in a new seat here. I like putting the pressure on you. I appreciate that. Friends, we're here to review some big losers from 2025. So, super, super, Micro Computer, ticker SMCI, Lulu Lemon, ticker Lulu, and Nike, ticker NKE. They were on decaf this year, friends, inflicting dreadful returns on those who've held. Today we're going to talk through each of these companies and then make a prediction about

whether they can turn it around in the new year. And if so, what will winning look like? So if you are ready to dive in, Tom, we're going to start with Super Micro Computer. For those who do not know, Super Microcomputer is like a reseller. They make servers, and those servers are customized by Super Micro. They have big relationships with Nvidia. They have relationships with AMD. And so they kind of build the chips, then they build the motherboards, and they customize these things for big customers, particularly big data center customers. They have really close relationships with these suppliers,

particularly with the chipset suppliers. And that had been really good business, Tom. But in 2025, the big boogeyman was Ernst & Young. And you may have seen this. This was late 2024, early 2025. Ernst & Young said, and I'm quoting here, this is, Gem and I pulled this from some of their accounting statements, unwilling to be associated with the financial statements prepared by management for Super Micro.

I'm going to say that's not good. That's not really good, Tom. So if we look at this, margins were compressed. There was some real hits to free cash flow, a lot of notable pressure from competitors like Dell and Eulett Packard Enterprise. So when you look at this company, what do you think? Do you see a company that is primed for a turnaround or one that has been, you know, whacked so badly that it's going to take them a while to get off their knees? I would go on the side of caution with this one in 2026. I would say it's probably going to be an underperformer, or at least the risk of a significant meltdown is high. And the reason I say that is because until the end of 2023, this was a pretty conservatively run business.

Their inventory, so as you mentioned, they mostly acquire, build inventory, and sell it to big data center clients. They were acquiring that inventory through their regular profits that they had earned through operations. But at the beginning of 2024, they started taking on a significant amount of debt. Since then, they've borrowed $4.4 billion, which is a significant, amount of money for them, and they've increased their inventory. They've used that money to build and buy inventory. They increased it by $3.3 billion. So this is a strategy that could work out well if they manage to sell that inventory at a decent price. But if there's a problem, if this AI boom slows down, they can't sell that inventory, it could become a significant problem for them.

Yeah, Tim, look, I'm in my 30th year. now investing. And one of the things that I have learned is that if the accountants don't believe the numbers, we shouldn't necessarily believe the numbers or management in general. So that is just a good reason to stay out of the stock. And the other thing is, you know, this was an AI play before a lot of these other companies went crazy. You look at the chat GPT moment. It was actually super micro that went nuts before Nvidia did. So things have really kind of gone south from there from an operating perspective, the revenue is trending in the wrong direction exactly at the time when you think it should be rising. Something just doesn't smell right here. Maybe it's me being a

little bit ignorant about the business and the ins and outs of exactly where they have an advantage and where they don't. I just think there's easier ways to play artificial intelligence, something as simple as alphabet. Just by the leader at a reasonable multiple, you don't have to bet on these comeback stories because I just don't think 2026 is going to be the year for Super Micro. Well, if we're wrong, and I like that you both went thumbs down on this because we're getting some early consensus here. But if we're wrong, I'll just mention this for the listeners here. There is the potential of an Nvidia tailwind here. Super Micro has said that they have a backlog of $36 billion in revenue, booked for, well, maybe not booked, but what they expect for, for

fiscal 2026, and that is supported by $13 billion just for the NVIDIA Blackwell Ultra Systems. So if they execute this, there might be some deep value opportunity here. But yeah, I like the way you put this, Travis. When the auditors say no, maybe you want to pay attention. All right. Up next, we're going to talk about yoga pants. It's a Lulu Lemon.

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And if I give you some data here, Travis, so Lulu Lemon underperform the market. This is, as of our recording today, we're pre-recording on December 17th for our December 29th show. So we're trying to get a little bit ahead for, you know, respect everybody's holiday breaks. But as of today, Travis, Lulu Lemon Stock is trailing. the market by about 60% year-to-date. It has been a difficult 2025. So it does look like a couple of things are at work here. Inventory issues, you know, maybe the inventory's been a little bit stale. Five percent decline in America's comps, so that same store sales down in Q3 of 2025. The breeze through products have not worked very well. And there

maybe some market share pressure here. So when you think about Lulu Lemon, Travis, where are you at? Do you think this is maybe a blip and you want to back this for 2026? Or do you think there's maybe some deeper issues here? I hate to be the negative Nelly because it looks like a value. If you look at their price earnings multiple and a trailing basis 14, forward basis 17, that's, that looks pretty good, especially they're continuing to grow. They've had some tailwinds in Asia. the problem with fashion and brands like this is it's really hard to stay on top. You've got companies like Nike. We'll talk about them in a bit.

They stayed on top for what, 30, 40 years? That is not typically the way that things work. And what I worry about with Lulu Lemon is they rode this yoga wave for 20 years or so. Now you're looking at where is the momentum. It's more with brands like Hoka and on. And that's where the growth is. look at where the excitement is, not only with athletes, it's not necessarily about going to yoga class. It's about going to a workout. It's going for a run. So it isn't just about the

fashion. It isn't just about yoga. It's about what are people doing, the things that are popular, even from a workout perspective, don't stay popular forever. If there was a pickleball brand, maybe that would be the hottest brand in the market that I would want to buy. But right now, I think, you know, stocks like on, like Decker's Outdoor, which owns Hoka, are a little more attractive. And Lul Lemon, I just worried that this is going to be a value trap for a long time for investors. I mean, that's an interesting point. I mean, Tom, I'm curious to know where you land on this.

You know, Travis says not likely to be a market beter in 2026 here. And I'll tee you up with this. Maybe CEO Calvin McDonald has his own doubts because he's going to be gone. at the end of January. He has announced that he's on his way. I wonder maybe if some of the tariffs and macro pressures here are weighing on him a little bit. Where do you see things going for Lulu Lemon? Particularly with respect to things like guidance cuts. I mean, it hasn't been great. Yeah. I think people will enjoy this because I disagree with Travis. We've got an opposite view on this. Like it? Go for it. The last Apparel company that melted down was

Under Armour. And it melted down, from my view, for two reasons. The first was an accounting scandal. It had gone from 20% growth every quarter for around about five, six, seven years or something. And then an accounting scandal revealed that they had been encouraging retailers to order early so that Under Armour could book the sales and keep up that 20% streak. When that was revealed, it really set off a chain of events for Under Armour. Also on the operational side, in terms of selling their gear, they started selling it in off-price channels, you know, just to try and get their inventory out the door. And I think that really damaged the brand. Neither of those two things has happened with Lulu Lemon.

The cycle has turned against them. People are stretched in the United States. They can't justify spending $130 on yoga pants. I think that eventually that will change. I think that Lululemon hasn't lost its brand. I know that people's tastes change and over time. I don't know what the future looks like in that respect, but I think it's a company that has that brand.

It has maintained its strategy. It's made a few mistakes. The CEO is leaving. I don't know if that may have just been due to pressure from the old founder and the guy. There's a man who owns 7% of the company. He could have encouraged him to leave and said, look, we need some fresh perspective and ideas in this company. So maybe something like that.

It's hard to speculate. But, you know, I don't know if 2026 will be the year that Lululemon comes back, but I definitely have faith in it as a good investment over, let's say, three to five years. All right. A plus one for the rule breaker in Lululemon. So we've got Tom saying yes, it's a market beater. Travis saying no. Up next, we're staying in the fashion lane.

We're going to talk about Nike. You're listening to Motley Full Money. The old adage goes, it isn't what you say, it's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through.

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All right, fools, we close our segment on the three big losers of 2025. Can Nike be the winner? And Tom, I'm going to come to you on this. So we have a new CEO. We talked about outgoing CEO, Calvin McDonald, Lulu Lemon. We have an inbound CEO, really a returning example. executive at Nike in Elliott Hill. And he has inherited, I think it's fair to say, a bit of a mess here.

We've seen some revenue declines. We've seen lower market share. We talked a little bit about the pressure on Lula Lemon. I think there's a lot of pressure on Nike. You've seen a lot of high performance from On, from Hoka. The king of the running shoe maybe is no longer. the king of the running shoe. I mean, Tom, talk to me about Nike and what you see here for a company that underperform the market by about 25% year-to-date. Are they on track to be an outperformer in 2026? I think that Nike is a little bit lost right now. And the reason I say this is because around about three, four, five years ago, they began a strategy of withdrawing from their wholesale

customers. So they were no longer selling to big shoe retailers like that. footlocker and so on to Zanashu warehouse. And they said that what they wanted to do was basically to copy the Lululemon model and control their brand better. So they just wanted to sell it through their own websites or through Nike dedicated stores or through Nike dedicated sections within certain types of shoe stores. And that strategy hasn't worked out that well for them. And now they're trying to reverse it and go back to those big retailers again. But in the meantime, these upstart brands like Hoka and On have kind of taken that shelf space.

And I think that Nike is now coming back to these retailers sort of cap in hand and saying, hey, can we please have some shelf space back? So until they figure that out, until they figure out how they're going to sell their shoes, I would avoid Nike, and I don't think it's a winner in 2020. 26. I mean, Travis, does begging work? Can we have our shelf space back? I mean, it is kind of an interesting point. And to be fair, you know, Elliott Hill did say, I mean, he's been honest with investors, I think, on balance, saying that the turnaround will take a while, even though the strategy is, and I'm quoting here, to win now. What does winning now look like here, Travis?

I mean, where are you at with Nike? Any sort of growth would be a win, I think, at this point. But the challenge for Nike is you want to have companies that are playing from a position of strength, and they're playing from a position of weakness right now. And I want to just go back and just give the way that I look at these companies strategically, you know, Thomas talked about it a little bit with these newer brands coming in. But the big picture is that Nike grew up in a world where supply owned the market. Right?

They could sign a huge deal with Michael Jordan, with Tiger Wood. woods. They could put them on TV, put them in magazines. And that was how you got attention to brands. And then you walked into a store like a Dix, like a foot locker. And you went, oh, I've seen those Nike shoes. I've seen those Jordan brand shoes before. That's how the market worked. In the world where Hoka and On are growing up, the market works very differently. You advertise on Instagram. You have Google ads. So you are more direct to consumer. That's what Nike saw as, oh, you know what? We want a piece of that too. And so they gave up their golden goose, the problem is the companies that have grown up internet native and being able to

advertise in this new environment have grown in that space. And now they're starting to take Nike's space. I think Nike, their future looks a lot more like Under Armour than it does like an onholding. And that's, that's, you know, really a damning thing to say. But, you know, the stock isn't even all that attractive right now, 35 times earnings, even on a forward basis, 35 times earnings, enterprise value to sales, which doesn't account for profitability and margins and things like that. But that's 2.2. You can buy on holding, which is growing 40% over the past three years for 4.3 times sales. So less than double the price on

a price to sales multiple. They're not focused on profitability quite yet, but they have 60% margins. Nike's much lower than that. Again, this really comes back to they are in a tough position because they grew up in a world where supply owned the shelf space. And that was what mattered. We have seen companies like Budweiser, like, you know, Procter and Gamble, when you lose that power position, when the market changes, you were just fundamentally not structured to adapt. That's what I worry about with Nike. So quick question for both of you. And we'll end on this. Give me a yes or no, Tom, you first. If there is tariff relief, because Nike, like a lot of other consumer brands, has been hit by the tariffs if there is significant

tariff relief. Does your opinion change? Yes or no, Tom? No, I don't think the tariff relief will be enough. Travis? No. All right. There you have it. Two thumbs down for Nike. Fools, this has been part of our series of Year End. Looking back to look forward to 2026. Thank you for for tuning in with us. Tom, Travis, thanks for being here. Really appreciate it. Fools, as always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy yourself stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content provided for informational purposes only to see our full

advertising disclosure. Please check out our show notes. Fools, we're so glad you hear. We hope you're having a wonderful holiday season. Our engineer, as always, is Dan Boyd. And our producer is Anand Chaka Baloo. Thanks to Tom King and Travis Hoyum for being here with me. I am your host, Tim Byers. We will see you again in 2026, Fools. Thank you for tuning in. Fool on.