Nike shares rise as market shows strength despite sales warnings
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Aug 01 2024
0mins
Should l Buy NKE?
Source: WSJ
Nike Inc shares increased by 5.01% as the stock crossed above the 5-day SMA, reflecting a positive movement in the market.
This rise comes amid concerns about Nike's anticipated low single-digit percentage decline in fiscal Q3 revenue, particularly due to challenges in the Chinese market. Despite these warnings, the overall market showed strength, with the Nasdaq-100 up 0.27% and the S&P 500 up 0.35%, suggesting sector rotation as investors remain cautiously optimistic about Nike's long-term strategies.
The implications of this price movement indicate that while Nike faces significant challenges, the current market conditions may provide a temporary boost to investor sentiment, allowing the stock to gain traction despite underlying concerns about future performance.
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Analyst Views on NKE
Wall Street analysts forecast NKE stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for NKE is 76.11 USD with a low forecast of 62.00 USD and a high forecast of 110.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
21 Analyst Rating
14 Buy
7 Hold
0 Sell
Moderate Buy
Current: 62.700
Low
62.00
Averages
76.11
High
110.00
Current: 62.700
Low
62.00
Averages
76.11
High
110.00
About NKE
NIKE, Inc. is engaged in the designing, marketing and distributing of athletic footwear, apparel, equipment and accessories and services for sports and fitness activities. The Company's operating segments include North America; Europe, Middle East & Africa (EMEA); Greater China; and Asia Pacific & Latin America (APLA). It sells a line of equipment and accessories under the NIKE Brand name, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment and other equipment designed for sports activities. It also designs products specifically for the Jordan Brand and Converse. The Jordan Brand designs, distributes and licenses athletic and casual footwear, apparel and accessories predominantly focused on basketball performance and culture using the Jumpman trademark. The Company also designs, distributes and licenses casual sneakers, apparel and accessories under the Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Company Response: A Nike spokesperson stated that the company has been cooperating extensively with the EEOC inquiry, having shared thousands of pages of information and is in the process of providing additional details, emphasizing their good-faith participation.
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See More
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- Lawsuit Background: The EEOC filed a lawsuit against Nike in a Missouri federal court on Wednesday, seeking information related to alleged discrimination against white employees, highlighting potential issues within the company's Diversity, Equity, and Inclusion (DEI) initiatives.
- Layoff Criteria Investigation: The EEOC is requesting details on Nike's layoff criteria, the use of race and ethnicity data, and programs that may have limited mentoring and leadership opportunities based on race, which could impact the company's reputation and employee morale.
- Increasing Financial Pressure: Despite setting diversity goals in 2022, CFO Matt Friend warned during the recent earnings call of expected low single-digit revenue declines and a 175-225 basis point drop in gross margins, indicating significant financial challenges ahead for the company.
- Stock Price Fluctuation: Nike's stock has declined 16.29% over the past year, yet it rose 5.40% on Wednesday to close at $64.22, reflecting a cautious market sentiment regarding the company's future performance.
See More
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- Job Cuts and Automation: Nike announced the reduction of 775 jobs at its U.S. distribution centers as part of ongoing automation efforts, which not only aims to enhance operational efficiency but may also reduce costs in the short term, potentially improving financial performance.
- Mixed Technical Indicators: Currently, Nike's stock is trading below both its 20-day and 100-day simple moving averages, indicating short-term weakness, with a 17.22% decline over the past 12 months, positioning it closer to its 52-week lows, reflecting market concerns about its future performance.
- Declining Earnings Outlook: The upcoming earnings report on March 19, 2026, is expected to show earnings per share dropping to 30 cents from 54 cents year-over-year, with revenue estimates at $11.25 billion, highlighting the growth challenges the company faces.
- Analyst Ratings and Targets: Despite receiving a 'Buy' rating with an average price target of $79.70, recent adjustments by analysts indicate market divergence regarding its future performance, with BTIG maintaining a $100 target while Needham downgraded to Hold.
See More
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- Limited Release: The Kirkland Signature x Nike SB Dunk Low was released at Costco for $134.99, and due to limited availability, resale prices have surged between $400 and $1,000, indicating strong market demand for the sneaker.
- Brand Influence: Since its launch in 1995, the Kirkland brand has been known for high quality and affordable pricing, generating approximately $86 billion in annual sales, which accounts for about one-third of Costco's total revenue, further driving the success of this collaboration.
- Design Features: Inspired by the popular Kirkland sweatshirt, the sneaker features a grey cotton upper, the Kirkland logo on the lateral heel, and a reverse insole depicting the Costco hotdog, capturing consumer interest.
- Market Response: This collaboration with Nike is regarded as the most successful brand partnership for Kirkland to date, showcasing Costco's potential in the premium market and laying the groundwork for future brand collaborations.
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