I’ve been bullish on athletic retailer Nike Inc (NYSE:NKE) for a long time. Back when NKE stock was hovering around $50 in late 2017, I was pounding on the table that concerns related to an Adidas AG (ADR)(OTCMKTS:ADDYY) takeover of the athletic retail market were overdone and that NKE stock was consequently way undervalued.

NKE stock is up more than 30% since then.

But as much I love Nike shoes, shirts and shorts, I don’t love NKE stock anymore. Above the $65 level, Nike stock looks fully valued considering relatively muted top-line growth prospects and ongoing margin compression concerns. Moreover, while Nike is successfully fighting back against Adidas, the Adidas trend remains very strong to this day.

All in all, I think NKE stock is fully valued here and now. I’m not terribly interested in the stock until it drops closer to $60.

Here’s a deeper look.

Nike Fighting Back, but Adidas Threat Still Lingers

Nike is the king of the athletic retail market. That has been the case ever since Michael Jordan — and it will remain the case into the foreseeable future thanks to big time endorsement deals, great branding and continued product innovation.

Adidas has been cutting into that dominance over the past several years, leveraging retro styles and its own big-time endorsements with athletes and musicians to drive a new era of lifestyle athletic apparel. For many quarters, Adidas was kicking Nike’s butt in this world. But then Nike started fighting back, rolling out its Consumer Direct Offense initiative. That initiative essentially comprised Nike doing everything Adidas did to become mega-popular, just at larger scale and with more resources (things like streamlining global investment, accelerating product innovation and pushing direct-selling channels).

This comeback from Nike is seen in commentary across the board from Nike’s wholesale athletic retail partners.

Foot Locker, Inc. (NYSE:FL) said in a conference call with analysts in early March that NBA apparel from Nike has been very popular over the past several months. FL management also said that Nike’s business was improving in Europe, and that there is good energy around Nike’s LeBron and Kyrie shoes.

Executives at Dicks Sporting Goods Inc (NYSE:DKS) also said in a conference call with analysts in early March that they were very enthusiastic about Nike’s innovation pipeline. They also said that Nike React shoes had a successful launch, and that Under Armour Inc (NYSE:UAA) was particularly weak (perhaps implying market share gain potential for Nike).

Meanwhile, Kohl’s Corporation (NYSE:KSS) said comparable sales growth for Nike in its stores was in the high single-digit range in the holiday quarter. That is really good, but lower than Adidas (up double digits).

If we take a look across the entire athletic retail landscape, then, what we see is that Nike is successfully fighting back against Adidas and largely preserving market share. But Adidas is still up-and-coming and will remain a legitimate competitive threat to Nike into the foreseeable future.

Nike Has Good, but Not Great, Long-Term Growth Prospects

All things considered, it’s unlikely that Nike experiences much revenue growth acceleration from here. Competition is still heating up, and Nike is very big. That combination should lead to stable revenue growth in the mid-single-digit range.

Gross margins are under pressure, and I don’t see much hope for a big rebound any time soon. The more digital sales Nike has, the lower gross margins will go because of higher fulfillment expenses. Also, the more Nike opens up its own stores, the higher operating expenses will go thanks to the costs of operating a physical location.

All together, margins will be on watch over the next several years. But there are also a ton of buybacks in the mix. And tax reform. Those two tailwinds should more than offset any margin compression, and Nike should be able to turn mid-single-digit revenue growth into somewhere around 15% earnings growth.

Over the past 5 years, NKE stock has traded around 24 times forward earnings for what has been 16% earnings growth per year. A 15% forward earnings growth profile is very similar to the trailing 16% earnings growth profile. Therefore, NKE stock’s valuation over the next 5 years should look very much like it did over the past 5 years.

That implies that NKE stock is fairly valued at 24 times forward earnings. Earnings estimates for next year are $2.68. A 24-times multiple on $2.68 earnings implies a year-end price target of somewhere between $64 and $65.

Bottom Line on NKE Stock

Great company. Slightly overvalued stock.

The bull market isn’t unwinding, but with rates rising and trade war fears looming, valuation has come under the spotlight. With valuation in the spotlight, I don’t realistically see NKE stock rallying from here in the near-term.

A pullback is coming. I’ll buy that dip. But I will wait for the stock to come down to around $60 first.

As of this writing, Luke Lango was long FL and DKS.