Nike Inc (NYSE:NKE) may be seeing a boom from a trend, but Nike stock still is a little precarious.

It wasn’t too long ago that ‘athleisure’ wasn’t even a made-up word. Lululemon Athletica inc. (NASDAQ:LULU) arguably ushered the idea in, as its yoga attire became wearable outside, but it didn’t take long for the movement to wrap up athletic apparel brands like Nike and Under Armour Inc (NYSE:UAA, NYSE:UA) as well.

While the athleisure phenomenon has gotten a little long in the tooth, it’s one of those practical fads that isn’t necessarily destined to end with a bang anytime soon. On the flip side, upgrading Nike stock now on the assumption that the athleisure trend remains impressively resilient might be a bit of a misguided measure.

Nike Stock Upgraded

HSBC analyst Erwan Rambourg made the call, upgrading Nike stock to a “Buy” last week because:

“Health is one of the key concerns of consumers for the future and whether it’s actually practicing sports or wearing sporting goods because it makes you feel better about yourself, we do not believe the appetite for those products is about to wane.”

Initially, the logic makes sense. After a second read-through of his bullish thesis on Nike stock, however, questions surface.

Chief among them? If wearing athletic apparel first and foremost makes you “feel better about yourself,” can it actually be true that “health is one of the key concerns of consumers” going forward? The answer to the question is a little fuzzy.

Granted, it’s easy to pick apart word-choices that in retrospect might make for a less-than-watertight argument. Three years ago when the athletic apparel craze was most frenzied, nobody would have batted an eye at such a comment. After all, analysts have to say something. It’s not always easy to explain a feeling with words.

In light of other recent comments about the athleisure trend though, the if/then corollaries have to be bulletproof for Nike stock to hold up. This upgrade doesn’t exactly stand up to the headwinds apparently blowing all around it.

Reality Check

Wells Fargo analyst Tom Nikic had the guts to be one of the first to say it late last year, explaining:

“The athletic apparel/footwear space was one of the strongest sub-sectors in our group coming out of the recession; but after an impressive multi-year growth cycle, we see several areas for concern that are not only likely weighing on the industry, but also have the potential to accelerate.”

In the meantime we’ve learned that  athletic wear sales in the United States only grew 2% from 2016’s levels in 2017, with denim sales (of all things) perking up again.

Under Armour, Lululemon, Nike and adidas AG (ADR) (OTCMKTS:ADDYY) are all still growing their top lines, mind you, and for the most part are growing their bottom lines.

Take a closer look at what those companies are being forced to do to keep up their growth pace though. Under Armour is being forced to tap into the international market more aggressively than it ever has before, as growth opportunities in the United States just aren’t there.

Meanwhile, Lululemon is developing athleisure lines for men after years of catering to only women. It’s going to take some stunningly effective marketing to convince male consumers it’s not a brand aimed at women.

The underlying problem only a few people are talking about? A saturated market.

GlobalData Retail Managing Director Neil Saunders saw the problem developing nearly a year ago, observing:

“The problem with the athleisure market isn’t so much that demand is dropping off a cliff, it’s more that supply is excessive and demand is not quite what it once was.”

Nike and adidas are running into the same headwind, even if not as evidently. Throw in the fact that while most people in the United States say they want to live a healthier style but still never actually do anything to achieve that goal, Rambourg’s premise that “health is one of the key concerns” for today’s consumers doesn’t necessarily translate into revenue growth.

Bottom Line for Nike Stock

Don’t mentally move all the way over to the bearish end of the Nike’s bullish-bearish spectrum. This is still the most recognizable name in the athletic apparel business, and clearly there are always going to be consumers looking for yoga pants and athletic shoes,  even if they’re not using them for their intended purpose.

On the other hand, nearly all trends are cyclical, moving back and forth between ‘red hot’ and ‘just so-so.’ Nothing breeds competition like a little success, and all the key players in this field ramped-up their production just as the athleisure and Athletic apparel frenzies were peaking. There’s a reason every name in this business has been struggling a little too much of late.

Just something to think about, if you were assuming the athleisure apparel craze that had been helping Nike stock was never going to end. Consumers have relatively short attention spans, and are forever looking for the next mania to spend time and money on.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.