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The S&P 500 Index ($SPX) increased by a robust 24% in 2023, making it an incredibly successful year for US stocks. Nike Inc. (NKE) was one of the worst-performing stocks on the Dow Jones Industrial Average ($DOWI) at the end of the year, though, and a noticeable laggard.
The shoe giant’s profits for the fiscal second quarter of 2024 were revealed in December, which marked a significant decline in the stock’s performance. The company’s sales growth forecast for the entire year was reduced to just 1% from the previous guidance of mid-single-digit growth, not only did it miss revenue estimates for the quarter.
Nike missed sales projections for the second quarter in a row, which is the first time it has done so since 2016. Nike’s stock is currently trading about 41% below its 52-week highs, having reached an all-time closing high of almost $173 in November 2021. The S&P 500 is trading close to its all-time highs, which makes the price action appear bleak.
Nike leads the market in this niche and is the most well-known sneaker brand in the world. In 2022, the stock saw a 30% loss among the wider market collapse; nonetheless, in 2023, the underperformance persisted despite robust markets. Is NIKE a good stock to invest in given its recent performance?
Will the Price of Nike Stock Rise Again?
Notably, Nike reduced its revenue projection for the entire year, although the firm still projects a 140–160 basis point increase in gross margins. This does not, however, include the $450 million charge for severance costs that the business anticipates realizing in Q3.
These are a component of the company’s restructuring strategy, which calls for annualized cost reductions of $2 billion over the following three years. The inventory on the company’s balance sheet has also been reduced; in Q2, it dropped by double digits.
Friend stated, “We feel great about our inventory,” during the results call. Despite the strong short-term challenges Nike confronts, I think the price movement has been overdone. Is NIKE a good stock to invest in April-June?
Summary
Nike’s stock performance has been lackluster despite a booming market, with its fiscal second-quarter results for 2024 showing a significant decline and missed sales projections for two consecutive quarters.
The stock is currently trading well below its 52-week highs, while the S&P 500 is nearing all-time highs. Nike’s revenue projection for the year has been reduced, but it anticipates an increase in gross margins and is implementing a restructuring strategy to reduce costs.
Despite short-term challenges, some analysts believe the stock’s price movement has been overly pessimistic. Technical analysis suggests a downtrend, but strong support may stabilize it, followed by a slow uptrend based on historical trends.
Whether Nike is a good investment in the coming months depends on individual risk tolerance and confidence in the company’s ability to overcome its current challenges. If you are interested in investing in Nike Stocks, make sure to visit eToro.
Reference List:
• Nike Stock 2024 Prediction: Will NKE Stock Finally Recover?