Big Question: Nike: Buy or sell?

Nike Inc. (NYSE: NKE), a leading player in the global footwear and apparel market, has recently come under question as its stock performance has fallen far below expectations. Down 59% from an all-time high, only growing sales by 1% in 2024 (totaling to $51.4 billion), Nike has also forecasted a mid-single-digit revenue decline in 2025. As a result, we have seen a significant drop in Nike’s stock. As of the latest analyses and market conditions, the stock has been a topic of debate among investors. Here’s a comprehensive look at why Nike stock might be a sell rather than a buy at this moment.

After the recent plunge in Nike's stock due to a disappointing earnings report, dropping nearly 20% from June 28th to June 29th, many critics have mixed feelings about the stock. Since June 28th, Nike stock has seen a steady decline, dropping by 4.59%. This downward trend may seem significant because this steady drop in price normally may make it seem as if the stock is in the lower part of the falling trend in the short term (potentially signaling a buy opportunity); On the other hand, many current predictions don't show this. Analysts at stockinvest.us predict within the next three months we will see a further drop of 13.13%, resulting in a bearish outlook for the future.

Another concern brought up is the divergence between volume and price, this tends to be a notable early warning sign for when a price is going to drop. The price rose from July 9th to July 12th, but during this time we saw trading volume fall even though there was an increase in stock price which is a sign that indicates that the uptrend is ending. Along with this, both short-term and long-term moving averages indicate a sell signal. 

Despite all these downsides mentioned, Nike’s valuation still remains at a strong point. Nike is being traded at a price-to-earnings ratio of 20, this is still a strong ratio, especially looking at the projected downfall for the stock, yet this is still a 10-year low for Nike corporation. 

While many investors see Nike's current low as a strong long-term buying opportunity, the many risks that have been signaled with the stock are not to be ignored. The disappointing financial performance, sell signals, and divergence between price and volume all work together to suggest that Nike's stock may continue to struggle. Current data and trends raise concern about the stock and I am in line with many of these analysts. I would say to sell or hold off on buying this stock till there are clear signs of a turnaround. 

https://stockinvest.us/stock/NKE

• Has been saying sell since june 28th

• Dropped 3.75 percent since then

• The stock is in the lower part of a wide falling trend in short term, normally a good sign to buy, but looking at the current trend the stock is predicted to drop 10.45% in the next 3 months

• Divergence between volume and price which is an early warning of a drop in price (volume fell during last trading day despite gaining prices) (july 9th)

• General sell signal (long and short term) by moving averages

•  there is currently a sell signal from the 3 month Moving Average Convergence Divergence (MACD).

• Nike holds several negative signals and is within a very wide and falling trend, so we believe it will still perform weakly in the next couple of days or weeks. We therefore hold a negative evaluation of this stock. We have upgraded our analysis conclusion for this stock since the last evaluation from a Strong Sell to a Sell candidate.

https://finance.yahoo.com/news/nike-stock-become-too-cheap-111500072.html

• Nike recently wrapped up its 2024 fiscal year, and it was an underwhelming one for the business. Revenue of $51.4 billion for the year ended May 31 was up by just 1%.

•  That's not the kind of growth that investors are going to be expecting from the business, especially if the stock is commanding a high earnings multiple. And the quarterly growth rate has been declining as well.

• management said on its recent earnings call that it expects sales to decline for the current fiscal year by mid-single digits.

• Nike could potentially be a good buy but for long term

• The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nike wasn’t one of them.

https://www.kiplinger.com/investing/stocks/nike-stock-sinks-on-dismal-sales-forecast-what-to-know

• Published 28th june 

• Nike (NKE) stock plunged more than 17% out of the gate Friday after the footwear and apparel giant reported revenue for its fiscal fourth quarter that fell short of estimates and reduced its sales outlook for fiscal 2025.

• This articles says to buy, but have lowered the target price significantly due to weak earning releases and reduced outlook

• For example, financial service firm wedbush still saying buy but changed target price from 115 to 97

• Tom ​​Nikic (analyst at wedbush) adds that he believes Nike will "eventually 'figure it out,'" but his "conviction thesis has certainly taken a hit.

https://finance.yahoo.com/news/once-decade-opportunity-2-magnificent-134500878.html

• share price down 59% from its all-time highs, Nike is currently experiencing the third-largest drawdown in its history.

• Only growing sales by 1% in 2024 and guiding for a mid-single-digit revenue decline for 2025, the company was unable to assuage the market's fears, leading to a new 15% drop in a single day in June.

• Trading with a price-to-earnings (P/E) ratio of 20 that is at 10-year lows and a 1.9% dividend that is its highest since the Great Recession, Nike could be a contrarian pick for long-term investors right now.

https://www.nasdaq.com/articles/down-59-highs-nike-stock-nasdaq-nke-buy-now#

Nike’s Outlook Doesn’t Look Promising

• The continuous worsening of Nike’s revenues would be more acceptable if it were merely a brief phase

• Nike’s management anticipates further challenges on the horizon, expecting a mid-single-digit decline in sales for FY2025. They attribute this forecast to product cycle transitions, slower growth in Nike Digital, and heightened macroeconomic uncertainties rather than competitive factors.

• Wall Street expects that revenues decline by about 4.6% this year to $49.0 billion. In turn, the market expects that this revenue decline and margin pressures will lead EPS to fall by a more significant 19.2% to $3.19.

• “In this possible scenario, I wouldn’t be surprised to see Nike stock record further losses in the coming quarters.”

• Wall Street seems a bit more optimistic about Nike’s future. The stock features a Moderate Buy consensus rating based on 13 Buys, 17 Holds, and two Sells assigned in the past three months. At $92.48, the average Nike stock price target suggests 26% upside potential.