Nike’s Share Price Plunges to its 52-Week Low: Is the Stock a Compelling Buy? (2024)

Nike’s Share Price Plunges to its 52-Week Low: Is the Stock a Compelling Buy? (1)

Nike (NYSE: NKE) is a globally-recognisable brand that many of us are familiar with.

Nike is most renowned for its footwear division, with two other iconic brands under its wing: Converse and Jordan.

Apart from footwear, the company designs and distributes an extensive range of products in the sports and fashion industry, including athletic equipment, and lifestyle apparel.

The athleisure brand has struggled since the start of 2024.

In addition to hitting a 52-week low, the share prices of Nike have hit a historic four-year low.

Share prices have plummeted by 33.7% year to date, placing Nike as the worst-performing company in the Dow Jones Industrial Average (^DJI).

With share prices languishing at their lowest level in years, investors may wonder if the time is right to “Just Do It” (alluding to Nike’s famous tagline) and scoop up shares of the sports footwear company.

Nike’s attempt to re-diversify its business

During the pandemic, Nike outlined a strategy to boost its online commerce.

The company aimed for a 50% revenue mix generated from its online commerce by fiscal year 2025 (ending 31 May 2025).

The digital business, which enjoys higher margins, was supposed to enhance Nike’s overall profitability.

Initially, Nike’s strategy yielded success.

For fiscal year 2021 (FY2021), despite the pandemic’s impact on traditional retail, Nike reported stellar financial results.

Notably, in the fourth quarter of FY2021, Nike’s digital business surged by 147% compared to the fourth quarter of FY2019.

Apart from digital growth, Nike recorded strong margin growth in FY2021, with gross margins increasing by 8.5 percentage points year on year.

This positive news propelled Nike’s share price to an all-time high of over US$160 in 2021.

Committing to this transition, Nike took a bold move and severed ties with several major wholesale retailers in 2021.

Some of these retailers included Urban Outfitters (NASDAQ: URBN), Designer Brands (NYSE: DBI), and Macy’s (NYSE: M).

An overcommitment to online commerce

However, the focus on online commerce eventually backfired.

Post-pandemic, Nike’s online business stagnated.

In the latest quarterly report, the fourth quarter of fiscal year 2024 (4Q FY2024), Nike reported a 10% year on year decline in revenue for its digital business.

Nike Direct, encompassing the online division and Nike’s own retail stores, only accounted for 40.5% of total revenue, suggesting that the 50% target by FY2025 is still far off.

Nike also experienced inventory buildup stemming from supply chain disruptions, culminating in a peak inventory of US$9.7 billion near the end of 2022.

Nike has been addressing its excess inventory by offering discounts over the past year.

Furthermore, Nike has been re-establishing relationships with wholesalers such as Macy’s in June 2023 to bring back Nike products.

With the slowdown in digital sales and increased discounting in traditional retail, Nike’s margins have declined from its peak.

This blunder has displeased many investors and contributed to Nike’s current slump.

Bearish guidance

In Q4 FY2024, Nike reported a slight 1.7% year on year decrease in sales revenue from US$12.8 billion to US$12.6 billion.

Despite this decrease, the company achieved a robust 45.5% year on year profit growth, from US$1 billion to US$1.5 billion, largely due to improved operational efficiency and lower expenses.

Nike has also partially resolved its inventory challenges with an 11% year on year drop in inventory levels.

The company’s full-year sales increased by a modest US$0.2 billion year on year to US$51.4 billion.

This indicates that Nike’s discounting strategies have successfully stimulated demand over the past year.

Despite this positive news, shares of Nike plunged by 25% on the day of its results release.

Two main reasons explain this reaction.

Firstly, sales from Nike Direct were down 8% year on year for the quarter, suggesting that Nike is losing its brand appeal.

Additionally, management provided a pessimistic outlook for the first quarter of fiscal year 2025 (1Q FY2025).

Nike anticipates net revenue to be lower by 10% year on year, attributing this forecast to ongoing challenges in the online segment and weak demand in China.

This was in contrast to an expected 3.2% year on year decline.

For FY2025, Nike now expects revenue to be down in the mid-single-digits level year on year compared with estimates of a slight 1% year-on-year increase.

This disparity between expectations and Nike’s forecast may have fuelled diminishing investor confidence.

The company also foresees continued macroeconomic uncertainty in China contributing to this softer outlook.

A possible investment opportunity

With Nike’s share price currently stuck in a rut, investors may smell a potential bargain.

After all, Nike remains the world’s biggest brand in sports footwear and apparel.

To put it into context, Nike generates twice the revenue of its closest competitor, Adidas (ETR: ADS).

This dominant position enables Nike to secure the most lucrative sponsorships with top-notch athletes worldwide, thereby entrenching its brand presence.

For example, Nike recently outbid Adidas as Germany’s official sponsor, ending Adidas’s 70-year partnership with the team.

Trading at a current price-to-earnings (P/E) ratio of 19.1 times, this is the lowest multiple Nike has been trading for the past five years.

Source: S&P Global Market Intelligence

At a five-year low P/E ratio, Nike’s shares appear to be trading at an attractive discount.

Turning back to innovation

In a recent interview with CNBC, Nike’s CEO, John Donahoe, acknowledged the lack of innovation during the pandemic.

Brands such as Hoka One One and Skechers (NYSE: SKX) are gaining in popularity for their comfort.

In terms of running performance, Nike’s shoes are no longer the favourite. Other brands such as Brooks and Asics have caught up.

Because of this, Nike is turning back to innovation by accelerating its new product releases to compete more effectively in the market.

The release of the Pegasus-41 earlier this year has been well-received by running experts.

Additionally, Nike has expanded its product offering beyond running, launching new models in its lifestyle and basketball division.

The upcoming Paris Olympics will be a perfect opportunity for Nike to showcase its new products.

The company will be unveiling its Air Innovation series in Paris, bringing it into the spotlight to a global audience.

If Nike is able to rekindle its innovative streak as well as implement a successful marketing campaign, the sports footwear giant has a good chance in reversing its current decline.

Get Smart: Execution risks

While Nike’s share price may seem like a bargain, investors are advised to stay cautious.

After all, the famous brand has yet to demonstrate traction in its efforts, which will require a gestation period.

The next few quarters are critical in determining whether Nike’s revitalisation efforts can turn its business around.

The good news is that management has acknowledged its shortcomings and identified the reasons for the poor sales performance.

However, there are still execution risks as it pivots back to utilising wholesalers with plans to restart its innovation engine.

Fortunately, Nike is a reliable dividend payer.

The company has been increasing its dividend payout without fail since 2004., with its most recent quarterly dividend for FY2024 standing at US$0.37 per share.

With a dividend yield of 2.1%, investors who scoop up Nike’s shares now will at least be rewarded with some passive income as they wait with bated breath for the company’s recovery.

If you’re looking to retire comfortably during this period of high inflation, join our FREE email series ‘Secrets to Becoming a Singapore Stock Market Millionaire ’. Over 5 emails, you’ll get daily investing tips that will help you build a recession-proof retirement portfolio. Easy to implement, and works for any level of investing experience. Click here to sign up now.

We have just revealed the top 7 US tech stocks poised for remarkable growth. In today’s fast-paced market, betting on these giants could mean more money in your pocket. With a focus on solid fundamentals and innovative prowess, these selections should earn a place in your portfolio. Click here to grab your FREE report now and start investing in the future, today.

Follow us on Facebook and Telegram for the latest investing news and analyses!

Disclosure: Aw Kai Rui does not own any of the stocks mentioned in this article.

The post Nike’s Share Price Plunges to its 52-Week Low: Is the Stock a Compelling Buy? appeared first on The Smart Investor.

Nike’s Share Price Plunges to its 52-Week Low: Is the Stock a Compelling Buy? (2024)

FAQs

Is Nike stock a good buy right now? ›

Nike has 27.56% upside potential, based on the analysts' average price target. Is NKE a Buy, Sell or Hold? Nike has a consensus rating of Moderate Buy which is based on 14 buy ratings, 16 hold ratings and 2 sell ratings.

What is the price prediction for Nike stock? ›

Based on short-term price targets offered by 28 analysts, the average price target for Nike comes to $90.93. The forecasts range from a low of $60.00 to a high of $125.00. The average price target represents an increase of 27.34% from the last closing price of $71.41.

Why might an investor pay attention to the 52-week high low of a stock price? ›

The 52-week high/low serves as a benchmark for a stock's performance over a significant period. By comparing the current price with the 52-week high/low, investors can gauge how well the stock is doing relative to its own history.

What's the highest Nike stock price ever? ›

NIKE - 44 Year Stock Price History | NKE
  • The all-time high NIKE stock closing price was 172.49 on November 05, 2021.
  • The NIKE 52-week high stock price is 123.39, which is 72.8% above the current share price.
  • The NIKE 52-week low stock price is 70.91, which is 0.7% below the current share price.

What are the 10 best stocks to buy right now? ›

Sign up for Kiplinger's Free E-Newsletters
Company (ticker)Analysts' consensus recommendation scoreAnalysts' consensus recommendation
ServiceNow (NOW)1.49Strong Buy
Assurant (AIZ)1.50Strong Buy
Howmet Aerospace (HWM)1.50Strong Buy
Insulet (PODD)1.50Strong Buy
21 more rows

How much are 500 shares of Nike in 1983 worth today? ›

Conversation. Although she received only $35 for a logo worth billions today, Nike gave her a special gift: In 1983 Carolyn was gifted 500 shares of Nike stock (today 32,000 shares) that is worth $4 million as of today, and a handmade diamond ring engraved with a Swoosh.

Who owns the most Nike stock? ›

The top shareholders of Nike are Phil Knight, Mark Parker, John Donahoe, Swoosh LLC, Vanguard Group Inc., and BlackRock Inc.

What will Nike stock price be in 2025? ›

Long-Term Nike Stock Price Predictions
YearPredictionChange
2025$ 81.0511.70%
2026$ 90.5324.77%
2027$ 101.1239.36%
2028$ 112.9555.67%
2 more rows

What was the share price of Nike when it went public? ›

Nike went public with a price of $23 per share, and the company has had 7 stock splits since then as follows: 2-for-1 on the 7th of January 1983; 8th of October 1990; 31st of October 1995; 2-for-1 on the 24th of October 1996; 2-for-1 on the 3rd of April 1997; 2-for-1 on the 26th December 2012; and 2-for-1 on the 24th ...

Is it good to buy stock at 52 week low? ›

In arguably most circumstances, when you see stocks at 52-week lows, you should avoid them. Based on prevailing market theory, equity valuations culminate from the most recent publicly available information. So, when a security falls to a fresh trailing one-year low, it's for a reason and usually not a good one.

What happens when a stock reaches its 52 week low? ›

When a stock hits its 52-week low, traders tend to sell these stocks. 52-week lows are used to apply trading strategies. For example, a NIFTY 52 week low can be used to find an exit point for that NIFTY stock. A trader is most likely to sell a stock when its price exceeds the 52-week low mark.

Is it bad to buy stock at 52 week high? ›

Effect of 52 Week High on Stocks

A 52 week high shows that there is a strong chance of significant gains ahead. It often nudges investors to buy more securities of the company.

Is Nike a buy right now? ›

Nike stock has received a consensus rating of buy. The average rating score is and is based on 84 buy ratings, 12 hold ratings, and 1 sell ratings.

How much is Nike worth in 2024? ›

$108.79 B

How much was Nike stock worth in 1980? ›

Nike had its IPO on Dec. 2, 1980. The stock was first sold to the public at $22 per share and traded in the over-the-counter (OTC) market on the NASDAQ. There have been seven stock splits -- all 2-for-1.

Is Nike a long-term stock? ›

While the company remains quite profitable, with a net income of $1.5 billion, investors shouldn't expect massive long-term growth. Nike is a mature company.

What is Nike stock price prediction for 2025? ›

Nike stock forecast for 2025: $ 81.05 (11.70%) Nike stock prediction for 2030: $ 140.92 (94.22%)

Is Nike undervalued? ›

As of today (2024-07-27), Nike's share price is $72.56. Nike's GF Value is $124.30. Therefore, Nike's Price-to-GF-Value for today is 0.58. Based on the relationship between the current stock price and the GF Value, GuruFocus believes Nike is Significantly Undervalued.

Which are the best stocks to invest in 2024? ›

Top Long Term Stocks to Buy in 2024 Based on 5Y Avg Net Profit Margin
NameSub-SectorClose Price (Rs.)
Sun Tv Network LtdTV Channels & Broadcasters783.90
UTI Asset Management Company LtdAsset Management1,025.00
Oberoi Realty LtdReal Estate1,796.00
Five-Star Business Finance LtdConsumer Finance829.85
6 more rows
Jul 22, 2024

References

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Errol Quitzon

Last Updated:

Views: 6325

Rating: 4.9 / 5 (59 voted)

Reviews: 82% of readers found this page helpful

Author information

Name: Errol Quitzon

Birthday: 1993-04-02

Address: 70604 Haley Lane, Port Weldonside, TN 99233-0942

Phone: +9665282866296

Job: Product Retail Agent

Hobby: Computer programming, Horseback riding, Hooping, Dance, Ice skating, Backpacking, Rafting

Introduction: My name is Errol Quitzon, I am a fair, cute, fancy, clean, attractive, sparkling, kind person who loves writing and wants to share my knowledge and understanding with you.